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How to Set Minimum Acceptable Bids, with an Application to Real Estate Auctions

Randolph McAfee, Daniel C Quan and Daniel Vincent

Journal of Industrial Economics, 2002, vol. 50, issue 4, 391-416

Abstract: In a general auction model with affiliated signals, common components to valuations and endogenous entry, we compute the equilibrium bidding strategies and outcomes, and derive a lower bound on the optimal reserve price. This lower bound can be computed using data on past auctions combined with information about the subsequent sales prices of unsold goods. We illustrate how to compute the lower bound using data from real estate auctions. Copyright 2002 by Blackwell Publishing Ltd

Date: 2002
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Journal of Industrial Economics is currently edited by Pierre Regibeau, Yeon-Koo Che, Kenneth Corts, Thomas Hubbard, Patrick Legros and Frank Verboven

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