Auction Form Preferences of Risk-Averse Bid Takers
AbstractWe analyze the preferences of a risk-averse seller over the class of "standard" auctions with symmetric and risk-neutral bidders. Assuming that buyers' private signals are independently distributed, we find that a sealed-bid first-price auction with an appropriately set reserve price is preferred by all risk-averse sellers to any other standard auction. In first- and second-price auctions, the more risk averse a seller, the lower the seller's optimal reserve price. Given two first-price auctions with reserve prices and entry fees such that both have the same screening level, all risk-averse sellers prefer the auction with the lower entry fee.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 29 (1998)
Issue (Month): 1 (Spring)
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Web page: http://www.rje.org
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- Audrey Hu & Liang Zou, 2008. "Auctions under Payoff Uncertainty: The Case with Heterogeneous Bidder-Aversion to Downside Risk," Tinbergen Institute Discussion Papers 08-044/1, Tinbergen Institute, revised 22 Apr 2008.
- Estrella Alonso & Gustavo Juan Tejada, 2012. "The Auction Model with Lowest Risk in a Duopolistic Electricity Market," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0, pages 3-21, January-D.
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