Rejection prices and an auctioneer with non-monotonic utility

Zhonghao Shui

No 1008, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: This paper considers an auctioneer who has a non-monotonic utility function with a unique maximizer. The auctioneer is able to reject all bids over some amount by using rejection prices. We show that the optimal rejection price for such an auctioneer is lower than and equal to that maximizer in first-price and second-price sealed-bid auctions, respectively. Further, in each auction we characterize a necessary and sufficient condition that by using the optimal rejection price not only the auctioneer but also bidders can be better off, compared to a standard auction. Finally, we find that the auctioneer strictly prefers a first-price sealed-bid auction if he is risk-averse when his revenue is lower than the maximizer or if the distribution of revenues which are lower than the maximizer in a standard first-price sealed-bid auction is first-order stochastic dominant over the one in a standard second-price sealed-bid auction.

Keywords: Auction; Rejection prices; Non-monotonic utility (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
Pages: 28pages
Date: 2019-04
New Economics Papers: this item is included in nep-des, nep-gth, nep-mic, nep-ore and nep-upt
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http://www.kier.kyoto-u.ac.jp/DP/DP1008.pdf (application/pdf)

Related works:
Journal Article: Rejection prices and an auctioneer with non-monotonic utility (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:1008

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