BOTTOM-FISHING AND DECLINING PRICES IN SEQUENTIAL AUCTIONS

We study standard sequential auctions, in which the seller chooses the order of sale, and right-to-choose auctions, in which the winner choo ses her preferred item from the remaining items. Empirically, prices i n sequential auctions tend to decline, and sellers often hold right-to -choose auctions. In our setting, the right-to-choose format guarantee s declining prices and efficiency. In the standard auction, a buyer ma y submit a low bid for the first item (''bottom-fishing'') despite its being her less-preferred item. An example shows that the standard auc tion has declining prices, is inefficient, and gives lower expected re venue than the right-to-choose. Journal of Economic Literature Classif ication Numbers: D44, D82. (C) 1994 Academic Press, Inc.