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How to Set Minimum Acceptable Bids, with an Application to Real Estate Auctions

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  • McAfee, R Preston
  • Quan, Daniel C
  • Vincent, Daniel R

Abstract

In a general auction model with affiliated signals, common components to valuations and endogenous entry, we compute the equilibrium bidding strategies and outcomes, and derive a lower bound on the optimal reserve price. This lower bound can be computed using data on past auctions combined with information about the subsequent sales prices of unsold goods. We illustrate how to compute the lower bound using data from real estate auctions. Copyright 2002 by Blackwell Publishing Ltd

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  • McAfee, R Preston & Quan, Daniel C & Vincent, Daniel R, 2002. "How to Set Minimum Acceptable Bids, with an Application to Real Estate Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 391-416, December.
  • Handle: RePEc:bla:jindec:v:50:y:2002:i:4:p:391-416
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    Cited by:

    1. Tan, Guofu & Yilankaya, Okan, 2006. "Equilibria in second price auctions with participation costs," Journal of Economic Theory, Elsevier, vol. 130(1), pages 205-219, September.
    2. Michael Peters, 1999. "Competition among mechanism designers in a common value environment," Review of Economic Design, Springer;Society for Economic Design, vol. 4(3), pages 273-292.
    3. Orley Ashenfelter & Kathryn Graddy, 2002. "Art Auctions: A Survey of Empirical Studies," Working Papers 121, Princeton University, Department of Economics, Center for Economic Policy Studies..
    4. Tong Li & Xiaoyong Zheng, 2009. "Entry and Competition Effects in First-Price Auctions: Theory and Evidence from Procurement Auctions," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1397-1429.
    5. Skreta, Vasiliki, 2015. "Optimal auction design under non-commitment," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 854-890.
    6. Takako Idee & Shinichiro Iwata & Teruyuki Taguchi, 2008. "Auction Price Formation with Costly Occupants: Evidence Using Data from the Osaka District Court," CIRJE F-Series CIRJE-F-593, CIRJE, Faculty of Economics, University of Tokyo.
    7. Daley, Brendan & Schwarz, Michael & Sonin, Konstantin, 2012. "Efficient investment in a dynamic auction environment," Games and Economic Behavior, Elsevier, vol. 75(1), pages 104-119.
    8. Sudip Gupta, 2004. "Endogenous Asymmetry and Entry in Sequential Multi-Unit Auctions: Identification and Estimation," Econometric Society 2004 North American Summer Meetings 566, Econometric Society.
    9. Tong Li, 2005. "Econometrics of first-price auctions with entry and binding reservation prices," Journal of Econometrics, Elsevier, vol. 126(1), pages 173-200, May.
    10. David Reiley, 2004. "Experimental evidence on the endogenous entry of bidders in internet auctions," Framed Field Experiments 00196, The Field Experiments Website.
    11. Jingfeng Lu, 2010. "Entry Coordination And Auction Design With Private Costs Of Information Acquisition," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 274-289, April.
    12. Patrick Bajari & Ali Hortaçsu, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June.
    13. Onur A. Koska & Ilke Onur & Frank Stähler, 2017. "The Economics of Vendor Bids," ERC Working Papers 1711, ERC - Economic Research Center, Middle East Technical University, revised Oct 2017.
    14. Philip A. Haile & Elie Tamer, 2003. "Inference with an Incomplete Model of English Auctions," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 1-51, February.
    15. Orley Ashenfelter & Kathryn Graddy, 2003. "Auctions and the Price of Art," Journal of Economic Literature, American Economic Association, pages 763-787.
    16. Patrick Bajari & Ali Hortacsu, 2003. "Economic Insights from Internet Auctions: A Survey," NBER Working Papers 10076, National Bureau of Economic Research, Inc.
    17. Aleksandar Saša Pekev{c} & Ilia Tsetlin, 2008. "Revenue Ranking of Discriminatory and Uniform Auctions with an Unknown Number of Bidders," Management Science, INFORMS, vol. 54(9), pages 1610-1623, September.
    18. Haile,P.A., 1999. "Auctions with resale," Working papers 33, Wisconsin Madison - Social Systems.

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