Reserve Prices as Signals

Arbeitspapier

This paper discusses the role of secret versus public reserve prices when bidders' valuations depend positively on the seller's private signal. A public reserve price is announced before the auction starts, and a secret reserve price is disclosed after the highest bid has been reached. The public reserve price regime may warrant a distortion as a good seller type may have to increase the reserve price beyond payo˙-maximization in order to be able to credibly signal her type. We introduce and determine a rational signaling equilibrium which adds two domination-based conditions to the belief structure of a weak perfect Bayesian equilibrium. We show that a secret (public) reserve price design qualifies as an equilibrium if the distortion is large (small).

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9581

Classification and Topics

• Classification: Wirtschaft ; Auctions
• Subject: auctions ; interdependent values ; optimal reserve prices ; rational signaling

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Koska, Onur A. ; Stähler, Frank
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/252098
• Last update: 10.03.2025, 11:44 AM CET