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Full-Text Articles in Industrial Organization
Second Chance Offers In Auctions, Aniruddha Bagchi, Brett Katzman, Timothy Mathews
Second Chance Offers In Auctions, Aniruddha Bagchi, Brett Katzman, Timothy Mathews
Aniruddha Bagchi
This paper examines situations in which a seller might make a second chance (take-it-or-leave-it) offer to a non-winning bidder at a price equal to their bid at auction. This study is motivated by the take-it-or-leave-it second chance offer rules used by eBay and a number of state procurement agencies. Equilibrium bidder behavior is determined for IPV sealed bid first price, second price, English, and Vickrey auctions when a second chance offer will be made with an exogenous probability p. In all but the Vickrey auction (which elicits the dominant strategy of bidding one’s value) equilibrium bids are lower than if …