Distributionally robust pricing in independent private value auctions

Alex Suzdaltsev

Journal of Economic Theory, 2022, vol. 206, issue C

Abstract: A seller chooses a reserve price in a second-price auction to maximize worst-case expected revenue when she knows only the mean of value distribution and an upper bound on either values themselves or variance. Values are private and iid. Using an indirect technique, we prove that it is always optimal to set the reserve price to the seller's own valuation. However, the maxmin reserve price may not be unique. Sometimes it is optimal to choose a deterministic reserve price even when randomization is allowed, which is unusual for maxmin settings. A second-price auction with the reserve equal to seller's value is an asymptotically optimal mechanism (among all ex post individually rational mechanisms) as the number of bidders grows without bound.

Keywords: Robust mechanism design; Worst-case objective; Auctions; Moments problems (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 (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:206:y:2022:i:c:s0022053122001454

DOI: 10.1016/j.jet.2022.105555

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