Sequential Auctions with Supply Uncertainty

Abstract

The paper provides an analysis of the impact of supply uncertainty on the formation of prices and on the seller's expected revenue in sequential first- and second-price sealed bid auctions. Attention is paid to the seller's optimal policy regarding the release or withholding of information about the available supply, to the buyers' strategic inferences about the seller's concealing policy and to the resulting sequence of expected prices. A case where the seller commits himself to be unaware of the available supply for sale is also considered. It is shown that such a commitment, which has been empirically observed, may lead the seller to increase, decrease or to maintain his long run expected revenue equal to the one obtained if the available supply was always reported.