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Auctions with Imperfect Commitment when the Reserve May Serve as a Signal

Author

Listed:
  • Byoung Heon Jun
  • Elmar G. Wolfstetter

Abstract

If bidders are uncertain whether the auctioneer sticks to the announced reserve, some bidders respond by strategic non-participation, speculating that the auctioneer may revoke the reserve. However, the reserve inadvertently signals the auctioneer’s type, which drives a unique separating and a multitude of pooling equilibria. If one eliminates belief systems that violate the “intuitive criterion”, one obtains a unique equilibrium reserve price equal to the seller’s own valuation. Paradoxically, even if bidders initially believe that the auctioneer is bound by his reserve almost with certainty, commitment has no value.

Suggested Citation

  • Byoung Heon Jun & Elmar G. Wolfstetter, 2014. "Auctions with Imperfect Commitment when the Reserve May Serve as a Signal," CESifo Working Paper Series 4586, CESifo.
    • Handle: RePEc:ces:ceswps:_4586
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    auctions; signaling; imperfect commitment;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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