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Reserve Prices in Auctions with Entry when the Seller in Risk Averse

Diego Moreno () and John Wooders ()

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: We study optimal public and secret reserve prices for risk averse sellers in second price auctions with endogenous entry. We show that an optimal public reserve price rP (observed by buyers prior to making their entry decisions) is above the seller's cost, c, whereas the secret reserve price rS (observed by buyers only upon entering the auction) is below the revenue maximizing reserve price r0. Thus, risk aversion raises public reserve prices, but lowers secret reserve prices. Further, we show that an optimal public reserve price is smaller than the secret reserve price (i.e., rP

Keywords: Second-price; auctions; Endogenous; entry; Public; and; secret; reserve; prices; Risk; Aversion (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-exp, nep-gth, nep-mic and nep-upt
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Journal Article: Reserve prices in auctions with entry when the seller is risk-averse (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:23951

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