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In competitive common value adverse selection markets, existence of a pure strategy equilibrium is often justified by appealing to Wilson’s (J Econ Theory 16(2):167–207, 1977) concept of ‘anticipatory equilibrium.’ The anticipatory equilibrium is based on the notion that all market participants expect unprofitable contracts to be withdrawn. We present a model of individual contract withdrawals that captures the strategic process underlying the anticipatory equilibrium concept: We introduce an additional—endogenously ending—stage into the Rothschild and Stiglitz (Q J Econ 90(4):629–649, 1976) model in which initial contracts can be withdrawn repeatedly after observation of competitors’ contract offers and withdrawals. Individual contract withdrawal allows for a rich strategic interaction. We show that an equilibrium exists where consumers obtain their respective second-best efficient Miyazaki–Wilson–Spence (MWS) contracts. However, this equilibrium requires latent contracts on offer. Furthermore, any individually rational and incentive-compatible allocation that earns nonnegative profits on aggregate can be sustained as equilibrium allocation. We further allow for contract addition as in Riley’s (Econometrica 47(2):331–359, 1979) ‘reactive equilibrium.’ Allowing for contract addition does not change the set of possible outcomes.

We compare the effects of information acquisition during a descending auction with its static counterpart, the first-price sealed-bid auction. In a framework with heterogeneous prior information, we show that an equilibrium with information acquisition exists in both auction formats. We show that everything else equal information acquisition is more desirable in the dynamic auction. Moreover, we characterize a set of parameter values where more information is acquired in the dynamic auction in equilibrium. If the costs of information acquisition are sufficiently low, the sealed-bid auction generates more revenue although the descending auction is more efficient.