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Reserve prices in second-price auctions with asymmetric bidders

Author

Listed:
  • Gagan Ghosh

    (California State University Fullerton)

  • Bingchao Huangfu

    (Nanjing Audit University)

  • Heng Liu

    (Rensselaer Polytechnic Institute)

Abstract

In second-price auctions with asymmetric bidders, we show that under a monotonicity condition on the ratio of marginal revenue functions there exists a unique optimal reserve price. The optimal reserve price increases with the number of (stochastically) strong bidders and decreases with the number of weak bidders. Fixing the total number of bidders, the seller’s revenue increases with the number of strong bidders.

Suggested Citation

  • Gagan Ghosh & Bingchao Huangfu & Heng Liu, 2025. "Reserve prices in second-price auctions with asymmetric bidders," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 13(1), pages 69-77, April.
    • Handle: RePEc:spr:etbull:v:13:y:2025:i:1:d:10.1007_s40505-024-00281-x
    DOI: 10.1007/s40505-024-00281-x
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    References listed on IDEAS

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    1. Jeongwoo Lee & Jaeok Park, 2024. "Signaling through entry in auctions with sequential and costly participation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 77(4), pages 1085-1126, June.
    2. Menicucci, Domenico, 2021. "In the basic auction model, the optimal reserve price may depend on the number of bidders," Journal of Economic Theory, Elsevier, vol. 198(C).
    3. John K.‐H. Quah & Bruno Strulovici, 2012. "Aggregating the Single Crossing Property," Econometrica, Econometric Society, vol. 80(5), pages 2333-2348, September.
    4. Kirkegaard, René, 2022. "Efficiency in asymmetric auctions with endogenous reserve prices," Games and Economic Behavior, Elsevier, vol. 132(C), pages 234-239.
    5. Sanyyam Khurana, 2024. "Auctions with resale at a later date," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(3), pages 843-875, November.
    6. Kotowski, Maciej H., 2018. "On asymmetric reserve prices," Theoretical Economics, Econometric Society, vol. 13(1), January.
    7. Pavlo Prokopovych & Nicholas C. Yannelis, 2022. "On nondegenerate equilibria of double auctions with several buyers and a price floor," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(2), pages 625-654, April.
    8. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Reserve prices; Second-price auctions; Asymmetry;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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