Auctions with imperfect commitment when the reserve may serve as a signal

Byoung Jun () and Elmar Wolfstetter

No 1304, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: If bidders are uncertain whether the auctioneer sticks to the announced reserve, some bidders respond by strategic non-participation, speculating that the auctioneer may revoke the reserve. However, the reserve inadvertently signals the auctioneer’s type, which drives a unique separating and a multitude of pooling equilibria. If one eliminates belief systems that violate the“intuitive criterion†, one obtains a unique equilibrium reserve price equal to the seller’s own valuation. Paradoxically, even if bidders initially believe that the auctioneer is bound by his reserve almost with certainty, commitment has no value.

Keywords: Auctions; mechanism design (search for similar items in EconPapers)
JEL-codes: D21 D43 D44 D45 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-cta and nep-mic
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Related works:
Working Paper: Auctions with Imperfect Commitment when the Reserve May Serve as a Signal (2014)
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