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Optimal Discrimination-Free Auctions

Author

Listed:
  • Bo Chen

    (College of Economics, Shenzhen University, Shenzhen, Guangdong 518060, China)

  • Dmitriy Knyazev

    (Faculty of Business, Economics and Statistics, University of Vienna, 1090 Vienna, Austria)

Abstract

This paper introduces a second-price auction with a flexible reserve price, where the reserve price for the top bidder is not fixed but rather determined as a function of all losing bids. We show that when bidders are ex ante heterogeneous, a second-price auction with an optimally chosen flexible reserve price not only generates strictly higher expected revenue than that of a second-price auction with any fixed reserve price but is also revenue-maximizing among all mechanisms that implement discrimination-free social choice functions. We also provide an axiomatic characterization of all second-price auctions with a flexible reserve price. Finally, we discuss real-life implementation.

Suggested Citation

  • Bo Chen & Dmitriy Knyazev, 2026. "Optimal Discrimination-Free Auctions," Management Science, INFORMS, vol. 72(3), pages 2267-2283, March.
    • Handle: RePEc:inm:ormnsc:v:72:y:2026:i:3:p:2267-2283
    DOI: 10.1287/mnsc.2024.04584
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    References listed on IDEAS

    as
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