A Risk Averse Seller in a Continuous Time Auction with a Buyout Option
AbstractAn auction with a buyout option occurring over continuous time with rules similar to eBayâ€™s â€œbuy it nowâ€ option is analyzed. It is shown that a risk averse seller facing risk neutral bidders will choose a buyout price low enough so that the buyout option is exercised with positive probability in equilibrium. Further, when the seller is risk averse and bidders are risk neutral, allowing the seller to offer a buyout option results in an ex ante Pareto improvement, compared to a similar auction without such an option.
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Bibliographic InfoArticle provided by Department of Economics, Universidade Federal de Pernambuco in its journal Brazilian Electronic Journal of Economics.
Volume (Year): 5 (2003)
Issue (Month): 2 (January)
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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