Sequential English Auctions : A Theory of Opening-Bid Fishing

Cassady (1967) describes an auction in which the auctioneer "fishes" for an opening bid, calling out lower and lower amounts until an opening bid is eventually placed. Once a bid is placed, it is not uncommon for the bidding to escalate above the initial starting price. The current study explains this puzzle in a model in which an auctioneer sells an indivisible good via English ascending-price auction and cannot commit to keeping the item off the market should the initial starting price fail to elicit any bids. A key insight of the paper is that the well-known strategy equivalence between the English auction and the second-price auction fails to extend to the sequential setting. This difference has important implications for the equilibrium starting-price path, giving rise to a Coase conjecture in the English auction but not in the second-price auction