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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- Audrey Hu & Steven A. Matthews & Liang Zou, 2009.
"Risk Aversion and Optimal Reserve Prices in First and Second-Price Auctions,"
PIER Working Paper Archive, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania
09-016, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
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