Auction Form Preferences of Risk-Averse Bid Takers

Keith Waehrer (), Ronald Harstad and Michael H. Rothkopf

RAND Journal of Economics, 1998, vol. 29, issue 1, 179-192

Abstract: We analyze the preferences of a risk-averse seller over the class of "standard" auctions with symmetric and risk-neutral bidders. Assuming that buyers' private signals are independently distributed, we find that a sealed-bid first-price auction with an appropriately set reserve price is preferred by all risk-averse sellers to any other standard auction. In first- and second-price auctions, the more risk averse a seller, the lower the seller's optimal reserve price. Given two first-price auctions with reserve prices and entry fees such that both have the same screening level, all risk-averse sellers prefer the auction with the lower entry fee.

Date: 1998
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