Reserve prices in auctions as reference points

Arbeitspapier

We consider second-price and first-price auctions in the symmetric independent private values framework. We modify the standard model by the assumption that the bidders have reference-based utility, where a publicly announced reserve price has some influence on the reference point. It turns out that the seller’s optimal reserve price is increasing in the number of bidders. Also in contrast to the standard model, we find that secret reserve prices can outperform public reserve prices, and that setting the optimal reserve price can be more valuable for the seller than attracting additional bidders.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bonn Econ Discussion Papers ; No. 24/2005

Classification and Topics

• Classification: Wirtschaft ; Auctions ; Asymmetric and Private Information; Mechanism Design ; Criteria for Decision-Making under Risk and Uncertainty
• Subject: Auction theory ; reference-dependent utility ; reserve prices ; Auktionstheorie ; Wirtschaftspsychologie ; Verhaltensökonomik

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Rosenkranz, Stephanie ; Schmitz, Patrick W.
• Event: Veröffentlichung
• (who): University of Bonn, Bonn Graduate School of Economics (BGSE)
• (where): Bonn
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/22930
• Last update: 10.03.2025, 11:44 AM CET