Reserve price when bidders are asymmetric
The authors analyze the optimal reserve price in a second price auction when there are N types of bidders whose valuations are drawn from different distribution functions. The seller cannot determine the specific type of each bidder. First, the authors show that the number of bidders affects the reserve price. Second, they give the sufficient conditions for the uniqueness of the optimal reserve price. Third, the authors find that if a bidder is replaced by a stronger bidder, the optimal reserve price may decrease. Finally, they give sufficient conditions that ensure the seller will not use a reserve price; hence, the auction will be efficient.
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- Estelle Cantillon, 2008.
"The effect of bidders' asymmetries on expected revenue in auctions,"
ULB Institutional Repository
2013/9001, ULB -- Universite Libre de Bruxelles.
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"Sequentially Optimal Auctions,"
1104, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Lebrun, Bernard, 1999. "First Price Auctions in the Asymmetric N Bidder Case," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 125-42, February.
- Levin, Dan & Smith, James L, 1996. "Optimal Reservation Prices in Auctions," Economic Journal, Royal Economic Society, vol. 106(438), pages 1271-83, September.
- Kirkegaard, Rene, 2005. "Participation fees vs. reserve prices in auctions with asymmetric or colluding buyers," Economics Letters, Elsevier, vol. 89(3), pages 328-332, December.
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