Common Value Auctions with Return Policies

Ruqu Wang and Jun Zhang

No 273735, Queen's Economics Department Working Papers from Queen's University - Department of Economics

Abstract: This paper examines the role of return policies in common value auctions. We first characterize the unique symmetric equilibrium in first-price and second-price auctions with continuous signals and discrete common values when certain return policies are provided. We then examine how the return policies affect a seller’s revenue. When the lowest common value is zero, a more generous return policy generates a higher seller’s revenue; the full refund policy extracts all the surplus and therefore implements the optimal selling mechanism; given any return policy, a second-price auction generates a higher revenue than a first-price auction. In a second-price auction where the lowest common value is not zero but still smaller than the seller’s reservation value, then a more generous return policy also generates a higher revenue; otherwise, the optimal return policy could be a full refund, no refund or partial refund policy.

Keywords: Financial Economics; Public Economics (search for similar items in EconPapers)
Pages: 39
Date: 2010-04
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/273735/files/qed_wp_1235.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:quedwp:273735

DOI: 10.22004/ag.econ.273735

Access Statistics for this paper

More papers in Queen's Economics Department Working Papers from Queen's University - Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().