Marieke Pahlke (Institute of Operations and Decision Sciences, Corvinus University) will present his paper on “Dynamic Consistency in Ambiguous Dutch Auctions” on November 27th at 11:00 AM, room QA406.
Abstract:
We study a decreasing price auction with an ambiguity-neutral seller and two ambiguity-averse buyers. Due to the dynamic structure, buyers learn about the valuation of the opponent buyer during the auction. We characterize a belief formation process that allows buyers to consider their knowledge of the information structure. This process leads to a rectangular ex-ante belief set and implies dynamically consistent behavior. Then, we show that the seller can extract almost all surplus even if buyers behave dynamically consistently. Further, in our setting, buyers accept higher prices compared to a consistent planning approach.