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Secret Reserve Prices in a Bidding Model with a Resale Option

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Author Info
Horstmann, Ignatius J
LaCasse, Chantale

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Abstract

This paper presents an auction model in which the seller may choose not to sell in spite of receiving a bid above the announced reserve price. Such behavior is seen frequently in auctions, yet would be suboptimal within most existing models. Here, the seller uses resale to signal information about the object's value that could not be easily communicated via a reserve price announcement. The model predicts that bids for reauctioned objects increase relative to initial bids and that, on average, prices of both reauctioned items and those sold at initial auction rise as delay in reauctioning increases. Copyright 1997 by American Economic Association.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 87 (1997)
Issue (Month): 4 (September)
Pages: 663-84
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Handle: RePEc:aea:aecrev:v:87:y:1997:i:4:p:663-84

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  1. Grant, S. & Kajii, A. & Menezes, F. & Ryan, M.J., 2002. "Auctions with options to re-auction," Discussion Paper 55, Tilburg University, Center for Economic Research. [Downloadable!]
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  2. Seow Eng Ong, 2006. "Price Discovery in Real Estate Auctions: The Story of Unsuccessful Attempts," Journal of Real Estate Research, American Real Estate Society, vol. 28(1), pages 39-60. [Downloadable!]
  3. repec:bep:thetop:v:6:y:2006:i:1:p:1260-1260 is not listed on IDEAS
  4. Stephanie Rosenkranz & Patrick W. Schmitz, 2005. "Reserve prices in auctions as reference points," Bonn Econ Discussion Papers bgse24_2005, University of Bonn, Germany. [Downloadable!]
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  5. Thomas Andrews & Cynthia Benzing, 2007. "The Determinants of Price in Internet Auctions of Used Cars," Atlantic Economic Journal, International Atlantic Economic Society, vol. 35(1), pages 43-57, March. [Downloadable!] (restricted)
  6. Alexander Matros & Andriy Zapechelnyuk, 2008. "Optimal fees in internet auctions," Review of Economic Design, Springer, vol. 12(3), pages 155-163, September. [Downloadable!] (restricted)
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  7. Orley Ashenfelter & Kathryn Graddy, 2002. "Art Auctions: A Survey of Empirical Studies," NBER Working Papers 8997, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Lu Ji & Tong Li, 2008. "Multi-round procurement auctions with secret reserve prices: theory and evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(7), pages 897-923. [Downloadable!]
  9. Lawrence M. Ausubel & Peter Cramton, 1998. "The Optimality of Being Efficient," Papers of Peter Cramton 98wpoe, University of Maryland, Department of Economics - Peter Cramton, revised 18 Jun 1999. [Downloadable!]
  10. Ausubel, Lawerence M. & Cramton, Peter, 1998. "The optimality of being efficient : designing auctions," Policy Research Working Paper Series 1985, The World Bank. [Downloadable!]
  11. Alexander Matros & Andriy Zapechelnyuk, 2009. "Competing Auction Houses," Discussion Papers 17, Kyiv School of Economics. [Downloadable!]
  12. Kathryn Graddy & Orley Ashenfelter, 2002. "Auctions and the Price of Art," Economics Series Working Papers 131, University of Oxford, Department of Economics. [Downloadable!]
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