Reserve Prices as Signals

Onur Koska and Frank Stähler

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: This paper discusses the role of secret versus public reserve prices when bidders’ valuations depend positively on the seller’s private signal. A public reserve price is announced before the auction starts, and a secret reserve price is disclosed after the highest bid has been reached. The public reserve price regime may warrant a distortion as a good seller type may have to increase the reserve price beyond payoff-maximization in order to be able to credibly signal her type. We introduce and determine a rational signaling equilibrium which adds two domination-based conditions to the belief structure of a weak perfect Bayesian equilibrium. We show that a secret (public) reserve price design qualifies as an equilibrium if the distortion is large (small).

Keywords: Auctions; Interdependent values; Optimal reserve prices; Rational signaling (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2022-02-01
New Economics Papers: this item is included in nep-cta, nep-des, nep-gth and nep-mic
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https://repec.canterbury.ac.nz/cbt/econwp/2210.pdf (application/pdf)

Related works:
Working Paper: Reserve Prices as Signals (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:22/10

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