It ain't over until it's over: English auctions with subsequent negotiations

Abstract

We consider a standard private value ascending-bid auction and show that subsequent negotiations make a seller worse off. The reason is that the seller’s optimal strategy does not change if she can make a take-it-orleave-it offer to the highest bidder after the auction. Consequently, her expected revenues do not increase with subsequent negotiations, but decrease if the highest bidder has some bargaining power.