First-Price Sealed-Bid Auctions with Secret Reservation Prices
In this paper we consider a first-price sealed bid auction with a secret reservation price. Such auctions are used frequently in France to sell timber. Within the independent private values paradigm, we show that the equilibrium strategy of the seller is to choose a reservation price equal to his private value. We characterize the symmetric Bayesian equilibrium strategy for the buyers as the solution of a differential equation. We also show that a strategy of public reservation price is better for the seller than a strategy of secret reservation price. To evaluate the expected gain for the seller from moving from a secret to the optimal public reservation price, we estimate the model using data from an actual auction of timber. First, we solve the problem of identification of the underlying distributions of private values. Then we propose a two-step structural nonparametric estimation method to shed some lights on the shapes of these distributions. This is used to formulate and estimate a parsimonious and structural parametric model that reproduces the salient features of our nonparametric analysis.
Volume (Year): (1994)
Issue (Month): 34 ()
|Contact details of provider:|| Postal: |
Web page: http://annales.ensae.fr/Email:
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:adr:anecst:y:1994:i:34:p:04. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Robert Gary-Bobo)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.