Second Chance Offers vs. Sequential Auctions: Theory and Behavior
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.
Salmon, T. and Wilson, B. "Second Chance Offers vs. Sequential Auctions: Theory and behavior." Economic Theory, 34(1), pp. 47-67, January, 2008.