Auctions with imperfect commitment when the reserve may serve as a signal
If bidders are uncertain whether the auctioneer sticks to the announced reserve, some bidders respond by strategic non-participation, speculating that the auctioneer may revoke the reserve. However, the reserve inadvertently signals the auctioneer¡¯s type, which drives a unique separating and a multitude of pooling equilibria. If one eliminates belief systems that violate the¡°intuitive criterion¡±, one obtains a unique equilibrium reserve price equal to the seller¡¯s own valuation. Paradoxically, even if bidders initially believe that the auctioneer is bound by his reserve almost with certainty, commitment has no value.
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