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Reserve prices in auctions with entry when the seller is risk-averse

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  • Moreno, Diego
  • Wooders, John

Abstract

We show that risk aversion raises the public reserve price rP above the seller’s cost c, but lowers the secret reserve price rS below the revenue maximizing reserve price r0. Further, rP

Suggested Citation

  • Moreno, Diego & Wooders, John, 2017. "Reserve prices in auctions with entry when the seller is risk-averse," Economics Letters, Elsevier, vol. 154(C), pages 6-9.
    • Handle: RePEc:eee:ecolet:v:154:y:2017:i:c:p:6-9
    DOI: 10.1016/j.econlet.2017.02.006
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    References listed on IDEAS

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    1. Audrey Hu & Steven A. Matthews & Liang Zou, 2009. "Risk Aversion and Optimal Reserve Prices in First and Second-Price Auctions, Second Version," PIER Working Paper Archive 10-001, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 03 Jan 2010.
    2. McAfee, R. Preston & McMillan, John, 1987. "Auctions with entry," Economics Letters, Elsevier, vol. 23(4), pages 343-347.
    3. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-599, June.
    4. Hu, Audrey & Matthews, Steven A. & Zou, Liang, 2010. "Risk aversion and optimal reserve prices in first- and second-price auctions," Journal of Economic Theory, Elsevier, vol. 145(3), pages 1188-1202, May.
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    Cited by:

    1. Meng Zhang & Shulin Liu, 2022. "Effects of risk aversion in auctions without and with default," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(3), pages 731-737, April.
    2. Audrey Hu & Steven A Matthews & Liang Zou, 2019. "Low Reserve Prices in Auctions," The Economic Journal, Royal Economic Society, vol. 129(622), pages 2563-2580.
    3. Estrella Alonso & Joaquín Sánchez-Soriano & Juan Tejada, 2020. "Mixed Mechanisms for Auctioning Ranked Items," Mathematics, MDPI, vol. 8(12), pages 1-26, December.

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    More about this item

    Keywords

    Second-price auctions; Endogenous entry; Public and secret reserve prices; Risk aversion;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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