Reputation in repeated second-price auctions (Q1106074)

A model in which two bidders take part in a series of second-price, common-value auctions is examined. The question of an optimal auction from an auctioneer's standpoint, in a repeated auction setting, is partially addressed. It is shown that the results from single auction models do not carry over to repeated auctions, when one of the bidders is endowed with a reputation for bidding aggressively. Second-price auctions with two bidders are highly susceptible to manipulative behaviour by an aggressive bidder, and yield much lower revenues to the auctioneer.