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Optimal Reserve Prices

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Abstract

This note scrutinizes the optimal reserve price in any ascending bid auction. If the auction may imply outcomes such that the winning bid is below the seller’s reservation utility, the seller will always set an optimal reserve price strictly larger than her reservation utility. The optimal reserve price depends only on two largest order statistics of the distribution of bids.

Suggested Citation

  • Onur A. Koska & Frank Stähler, 2022. "Optimal Reserve Prices," Working Papers in Economics 22/07, University of Canterbury, Department of Economics and Finance.
    • Handle: RePEc:cbt:econwp:22/07
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    File URL: https://repec.canterbury.ac.nz/cbt/econwp/2207.pdf
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    Keywords

    Auctions; Interdependent values; Optimal reserve prices;
    All these keywords.

    JEL classification:

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

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