Reserve Prices as Signals

Onur Koska and Frank Stähler

No 9581, CESifo Working Paper Series from CESifo

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 payo˙-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)
Date: 2022
New Economics Papers: this item is included in nep-cta, nep-des, nep-gth and nep-mic
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Working Paper: Reserve Prices as Signals (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9581

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