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On absolute auctions and secret reserve prices

Author

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  • Philippe Jehiel

    (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - EHESS - École des hautes études en sciences sociales - INRA - Institut National de la Recherche Agronomique - ENS Paris - École normale supérieure - Paris, PSE - Paris School of Economics)

  • Laurent Lamy

    () (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - EHESS - École des hautes études en sciences sociales - INRA - Institut National de la Recherche Agronomique - ENS Paris - École normale supérieure - Paris, PSE - Paris School of Economics)

Abstract

From a theory viewpoint, the use of auctions with zero public reserve prices, also called absolute auctions, or of auctions with secret reserve prices, is somewhat 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

  • Philippe Jehiel & Laurent Lamy, 2015. "On absolute auctions and secret reserve prices," PSE - Labex "OSE-Ouvrir la Science Economique" halshs-01155875, HAL.
  • Handle: RePEc:hal:pseose:halshs-01155875
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01155875
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    Cited by:

    1. repec:aea:aecrev:v:108:y:2018:i:8:p:2246-76 is not listed on IDEAS
    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. 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.
    4. 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.
    5. repec:eee:ecolet:v:156:y:2017:i:c:p:142-144 is not listed on IDEAS
    6. Audrey Hu & Steven Matthews & Liang Zou, 2017. "Low Reserve Prices in Auctions," PIER Working Paper Archive 17-004, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 13 Mar 2017.
    7. 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.

    More about this item

    Keywords

    secret reserve prices;

    JEL classification:

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

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