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A note on reserve price commitments in the Vickrey auction

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  • Glowicka, Ela
  • Beck, Jonathan

Abstract

This note provides a simple explanation why sellers rarely set optimal reserve prices in one-shot auctions. In a standard sealed-bid second-price auction, bidders with private values do not bid truthfully if the seller cannot commit to her announced reserve price. Consequently, expected revenue may be lower than without the announcement of a reserve price.

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File URL: http://mpra.ub.uni-muenchen.de/6669/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6669.

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Date of creation: Aug 2006
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Handle: RePEc:pra:mprapa:6669

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Keywords: Vickrey auction; reserve price; commitment;

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  1. Wolfstetter, Elmar, 2001. "The Swiss UMTS spectrum auction flop: Bad luck or bad design?," SFB 373 Discussion Papers 2001,50, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  2. Grant, S. & Kajii, A. & Menezes, F. & Ryan, M., 2002. "Auctions with Options to Re-auction," Discussion Paper 2002-55, Tilburg University, Center for Economic Research.
  3. Menezes, Flavio & Ryan, Matthew J., 2005. "Reserve price commitments in auctions," Economics Letters, Elsevier, vol. 87(1), pages 35-39, April.
  4. Blume, Andreas & Heidhues, Paul, 2004. "All equilibria of the Vickrey auction," Journal of Economic Theory, Elsevier, vol. 114(1), pages 170-177, January.
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