Low Reserve Prices in Auctions
Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review
Related Research Unit(s)
|Journal / Publication||Economic Journal|
|Online published||5 Apr 2019|
|Publication status||Published - Aug 2019|
|Link to Scopus||https://www.scopus.com/record/display.uri?eid=2-s2.0-85073545531&origin=recordpage|
A standard result in auction theory is that a seller’s profit-maximizing reserve price is no less than his own value for the good. In practice, however, reserve prices often appear to be less than sellers’ values. This paper revisits the theory of optimal reserves in the context of second-price auctions. The main result is that an optimal reserve is less than the seller’s value if the bidders are sufficiently risk averse and if their values are sufficiently interdependent. The resulting outcome may approximate that of an auction without reserve, i.e., an absolute auction.
- reserve price, risk aversion, interdependent values, second-price auction
Research Unit(s) information for this publication is provided by the author(s) concerned.