A two stage sequential auction with multi-unit demands

Working within the independent private values paradigm, I examine a sequence of two second price auctions where individual bidders have diminishing marginal valuations. Equilibria are characterized for complete and incomplete informational settings. When information is complete, allocations can be inefficient and price sequences are constant or decreasing. However, when information is incomplete and symmetric, equilibrium behavior produces efficient outcomes and an expectation of increasing prices. These divergent findings are reconciled using an argument based on ex ante bidder asymmetry that can also explain the declining price anomaly. Finally, comparisons to other auctions are made in terms efficiency and revenue generation. (C) 1999 Academic Press.