On the Comparative Statics of the Optimal Reserve Price: A Comment on "Reserve price Signaling"

Laurent Lamy

No 2007-23, Working Papers from Center for Research in Economics and Statistics

Abstract: This comment finds an error in Cai, Riley and Ye [2] in presenceof informational externalities between bidders, the correction of whichgives a broader view on their comparative statics results with respectto n, the number of bidders. A linear specification of the informationalexternalities between bidders is analyzed. In contrast to their claim,the reserve price of the lowest type sellers is shown to be decreasing inn. We establish that the participation threshold is still increasing in nfor high type sellers confirming their main insight. Nevertheless, it isthe opposite comparative statics that holds for the reserve price.

Pages: 20
Date: 2007
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