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Vickrey Auctions with Reserve Pricing

We generalize the Vickrey auction to allow for reserve pricing in a multiple item auction with interdependent values. By withholding quantity in some circumstances, the seller can improve revenues or mitigate collusion. In the Vickrey auction with reserve pricing, the seller determines the quantity to be made available as a function of the bidders' private information, and then efficiently allocates this quantity among the bidders. Truthful bidding is a dominant strategy with private values and an ex post equilibrium with interdependent values. If the auction is followed by resale, then truthful bidding remains an equilibrium in the auction-plus-resale game. In settings where resale exhausts all the gains from trade among the bidders, the Vickrey auction with reserve pricing maximizes seller revenues.

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File URL: http://www.cramton.umd.edu/papers1995-1999/99wp-vickrey-auctions-with-reserve-pricing.pdf
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Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 99wpvic.

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Length: 13 pages
Date of creation: 2004
Date of revision: 28 Jun 1999
Publication status: Published in Economic Theory, 23, 493-505, April 2004. Reprinted in Charalambos Aliprantis, et al. (eds.), Assets, Beliefs, and Equilibria in Economic Dynamics, Berlin: Springer-Verlag, 355-368, 2003.
Handle: RePEc:pcc:pccumd:99wpvic
Contact details of provider: Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
Phone: (202) 318-0520
Fax: (202) 318-0520
Web page: http://www.cramton.umd.edu

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  1. Back, Kerry & Zender, Jaime F, 1993. "Auctions of Divisible Goods: On the Rationale for the Treasury Experiment," Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 733-64.
  2. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
  3. P. Dasgupta & Eric Maskin, 1998. "Efficient Auctions," Harvard Institute of Economic Research Working Papers 1857, Harvard - Institute of Economic Research.
  4. John McMillan, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-162, Summer.
  5. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
  6. Lawrence M. Ausubel & Peter Cramton, 1998. "The Optimality of Being Efficient," Papers of Peter Cramton 98wpoe, University of Maryland, Department of Economics - Peter Cramton, revised 18 Jun 1999.
  7. Yvan Lengwiler, 1998. "The multiple unit auction with variable supply," Finance and Economics Discussion Series 1998-28, Board of Governors of the Federal Reserve System (U.S.).
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