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Sequential auctions with informational externalities and aversion to price risk : decreasing and increasing price sequences

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Mezzetti, Claudio (2011) Sequential auctions with informational externalities and aversion to price risk : decreasing and increasing price sequences. Economic Journal, Vol.121 (No.555). pp. 990-1016. doi:10.1111/j.1468-0297.2011.02438.x

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Official URL: http://dx.doi.org/10.1111/j.1468-0297.2011.02438.x

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Abstract

A large body of empirical research has shown that prices of identical goods sold sequentially sometimes increase and often decline across rounds. This article introduces a tractable form of risk aversion, called aversion to price risk, and shows that declining prices arise naturally when bidders are averse to price risk. When there are informational externalities, there is a countervailing effect which pushes prices to raise along the path of a sequential auction, even if bidder's signals are independent. The article shows how to decompose the effect of aversion to price risk from the effect of informational externalities.

Item Type: Journal Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH): Pricing, Auctions -- Economic aspects
Journal or Publication Title: Economic Journal
Publisher: Blackwell
ISSN: 0013-0133
Official Date: September 2011
Dates:
DateEvent
September 2011Published
Volume: Vol.121
Number: No.555
Page Range: pp. 990-1016
DOI: 10.1111/j.1468-0297.2011.02438.x
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access

Data sourced from Thomson Reuters' Web of Knowledge

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