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Auctioning with Aspirations: Keep Them Low (Enough)

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  • Shunda, Nicholas

Abstract

In an auction with a buy price, a seller offers bidders the opportunity to forgo competing in an auction by transacting immediately at a pre-specified fixed price. If a seller has aspirations in the form of a reference price that depends upon the auction's reserve price and buy price, she does best to keep her aspirations sufficiently low by designing a no-reserve auction with a buy price low enough that some bidder types would exercise it with positive probability in equilibrium. The seller is indifferent between the auction component of her mechanism being a first- or second-price auction.

Suggested Citation

  • Shunda, Nicholas, 2009. "Auctioning with Aspirations: Keep Them Low (Enough)," MPRA Paper 16242, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:16242
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    References listed on IDEAS

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    1. Stephanie Rosenkranz & Patrick W. Schmitz, 2007. "Reserve Prices in Auctions as Reference Points," Economic Journal, Royal Economic Society, vol. 117(520), pages 637-653, April.
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    More about this item

    Keywords

    Auction; Aspiration; Buy price; Internet; Reference-dependence;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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