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On absolute auctions and secret reserve prices

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  • Jehiel, Philippe
  • Lamy, Laurent

Abstract

From a theory viewpoint, the use of auctions with zero public reserve prices also called absolute auctions, or the use of auctions with secret reserve prices is somehow puzzling despite being common. By allowing that buyers differ in their processing of past data regarding how the participation rate varies with the auction format and how reserve prices are distributed when secret, we show in a competitive environment that these auction formats may endogenously emerge. We also analyze how buyers with various sophistications and sellers with various costs sort into the different formats, thereby offering a range of testable predictions. Alternative approaches are reviewed.

Suggested Citation

  • Jehiel, Philippe & Lamy, Laurent, 2014. "On absolute auctions and secret reserve prices," CEPR Discussion Papers 9791, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9791
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    Citations

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    Cited by:

    1. Onur A. Koska & Frank Stähler, 2022. "Reserve Prices as Signals," Working Papers in Economics 22/10, University of Canterbury, Department of Economics and Finance.
    2. Guillaume Plantin & Jean Tirole, 2018. "Marking to Market versus Taking to Market," American Economic Review, American Economic Association, vol. 108(8), pages 2246-2276, August.
    3. Philippe Jehiel, 2022. "Analogy-Based Expectation Equilibrium and Related Concepts:Theory, Applications, and Beyond," Working Papers halshs-03735680, HAL.
    4. Brisset, Karine & Cochard, François & Le Gallo, Julie, 2015. "Secret versus public reserve price in an “outcry” English procurement auction: Experimental results," International Journal of Production Economics, Elsevier, vol. 169(C), pages 285-298.
    5. 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.
    6. Onur A. Koska & Frank Stähler, 2017. "When should bidders learn reserve prices?," ERC Working Papers 1712, ERC - Economic Research Center, Middle East Technical University, revised Oct 2017.
    7. Tristan Gagnon-Bartsch & Marco Pagnozzi & Antonio Rosato, 2021. "Projection of Private Values in Auctions," American Economic Review, American Economic Association, vol. 111(10), pages 3256-3298, October.
    8. Alex Suzdaltsev, 2020. "Distributionally Robust Pricing in Independent Private Value Auctions," Papers 2008.01618, arXiv.org, revised Aug 2020.
    9. Philippe Jehiel & Laurent Lamy, 2015. "On absolute auctions and secret reserve prices," RAND Journal of Economics, RAND Corporation, vol. 46(2), pages 241-270, June.
    10. repec:hal:spmain:info:hdl:2441/4mmob120cl8g9ph8aisjq72u3h is not listed on IDEAS
    11. Pasha Andreyanov & El Hadi Caoui, 2022. "Secret reserve prices by uninformed sellers," Quantitative Economics, Econometric Society, vol. 13(3), pages 1203-1256, July.
    12. Marleen Marra, 2019. "Pricing and Fees in Auction Platforms with Two-Sided Entry," Working Papers hal-03393068, HAL.
    13. repec:hal:spmain:info:hdl:2441/7pu0mfr14h9ba9rsrotsskha8c is not listed on IDEAS
    14. Suzdaltsev, Alex, 2022. "Distributionally robust pricing in independent private value auctions," Journal of Economic Theory, Elsevier, vol. 206(C).
    15. repec:hal:spmain:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    16. repec:hal:wpspec:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    17. Kazumura, Tomoya & Mishra, Debasis & Serizawa, Shigehiro, 2020. "Strategy-proof multi-object mechanism design: Ex-post revenue maximization with non-quasilinear preferences," Journal of Economic Theory, Elsevier, vol. 188(C).
    18. Lovo, Stefano & Spaenjers, Christophe, 2017. "No-trade in second-price auctions with entry costs and secret reserve prices," Economics Letters, Elsevier, vol. 156(C), pages 142-144.
    19. Eda Gülşen & Erdal Özmen, 2017. "Monetary Policy Trilemma, Inflation Targeting And Global Financial Crisis," ERC Working Papers 1714, ERC - Economic Research Center, Middle East Technical University, revised Nov 2017.

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    More about this item

    Keywords

    Absolute auctions; Analogy-based expectations; Competing auctions; Endogenous entry; Rational expectations; Secret reserve prices;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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