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

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URI: https://hdl.handle.net/10016/23951
ISSN: 2340-5031
UXXI: DT/0000001495
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2016-12
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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 < rS). Hence, for a risk averse seller public and secret reserve prices are ordered: c < rP < rS < r0.
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Second-price auctions, Endogenous entry, Public and secret reserve prices, Risk Aversion
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DE - Working Papers. Economics. WE