Efficiency in asymmetric auctions with endogenous reserve prices

Rene Kirkegaard

Games and Economic Behavior, 2022, vol. 132, issue C, 234-239

Abstract: In the standard independent private values model, the second-price auction (SPA) is generally taken to be more efficient than the first-price auction (FPA) when bidders are asymmetric. However, this conclusion assumes that reserve prices are identical across auctions. This paper endogenizes the reserve price and shows that it may be lower in the FPA. Hence, gains from trade are realized more often in the FPA. This effect may make the FPA more efficient than the SPA. Indeed, the FPA may Pareto dominate the SPA. That is, the FPA may be more profitable and yet be preferred by all bidders.

Keywords: Asymmetric auctions; Efficiency; Reserve prices (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:132:y:2022:i:c:p:234-239

DOI: 10.1016/j.geb.2021.12.007

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