A comparative study of sequential and simultaneous auctions

Speaker: Shaheen Fatima

Sequential and simultaneous auctions are two important mechanisms for buying and selling multiple objects. These two mechanisms yield different outcomes (i.e., different surpluses, different revenues, and also different profits to the winning bidders). Given this, we compare the outcomes for the sequential and simultaneous mechanisms for the following scenario. There are multiple similar objects for sale, each object is sold in a separate auction, and each bidder needs only one object. Furthermore, each object has both common and private value components and bidders are uncertain about these values. We first determine the equilibrium bidding strategies for each individual auction for the simultaneous and sequential cases. We then consider the case where the private and common values have a uniform distribution and compare the two mechanisms in terms of a bidder's ex-ante expected profit, the auctioneer's expected cumulative revenue, and the expected cumulative surplus. Our study shows that, for all the three auction rules, the expected cumulative surplus and the auctioneer's expected cumulative revenue is higher for the sequential mechanism. However, the mechanism that generates a higher ex-ante expected profit for the bidders depends on the number of objects being auctioned and the number of participating bidders, and it is sometimes higher for sequential mechanism and sometimes for the simultaneous one.