Title

Second Chance Offers vs. Sequential Auctions: Theory and Behavior

Document Type

Article

Publication Date

1-2008

Abstract

Second chance offers in online marketplaces involve a seller conducting an auction for a single object and then using information from the auction to offer a losing bidder a take-it-or-leave-it price for another unit. We theoretically and experimentally investigate this practice and compare it to two sequential auctions. We show that the equilibrium bidding strategy in the second chance offer mechanism only exists in mixed strategies, and we observe that this mechanism generates more profit for the auctioneer than two sequential auctions. We also observe virtually no rejections of profitable offers in the ultimatum bargaining stage.

Comments

This article was originally published in Economic Theory, volume 34, issue 1, in 2008.

The link above is to the authoritative publisher’s version, as noted by the Economic Science Institute, and may reside behind a paywall.

Peer Reviewed

1

Copyright

Springer