Uniformed Bidding in Sequential Auctions

We consider a private value auction with one-sided incomplete information in which two objects are sold in a sequence of two second-price auctions. Buyers have multi-unit demands and both are asymmetrically informed at thee x-ante stage of the game. One buyer perfectly knows his type and the other is uninformed about his own type. We consider interim information acquisition for the uninformed buyer and derive an asymmetric equilibrium which is shown to produce a declining price sequence across both sales. The supermartingale property of the price sequence stems from the uninformed buyer’s incentives to gather private information which leads to an aggressive bidding at the first-stage auction.
Keywords: Sequential auctions ; Uninformed bidding ; Multi-unit demand ; Declining price anomaly JEL Classification: D44; D82; L86; M37