Reserve prices in auctions with entry when the seller is risk-averse

Diego Moreno; John Wooders

doi:10.1016/j.econlet.2017.02.006

Reserve prices in auctions with entry when the seller is risk-averse

Diego Moreno, John Wooders

Economics

Research output: Contribution to journal › Article › peer-review

Abstract

We show that risk aversion raises the public reserve price r_P above the seller's cost c, but lowers the secret reserve price r_S below the revenue maximizing reserve price r₀. Further, r_P<r_S. Hence, for a risk averse seller, public and secret reserve prices are ordered: c<r_P<r_S<r₀.

Original language	English (US)
Pages (from-to)	6-9
Number of pages	4
Journal	Economics Letters
Volume	154
DOIs	https://doi.org/10.1016/j.econlet.2017.02.006
State	Published - May 1 2017

Keywords

Endogenous entry
Public and secret reserve prices
Risk aversion
Second-price auctions

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.econlet.2017.02.006

Cite this

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title = "Reserve prices in auctions with entry when the seller is risk-averse",

abstract = "We show that risk aversion raises the public reserve price rP above the seller's cost c, but lowers the secret reserve price rS below the revenue maximizing reserve price r0. Further, rPS. Hence, for a risk averse seller, public and secret reserve prices are ordered: cPS0.",

keywords = "Endogenous entry, Public and secret reserve prices, Risk aversion, Second-price auctions",

author = "Diego Moreno and John Wooders",

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AB - We show that risk aversion raises the public reserve price rP above the seller's cost c, but lowers the secret reserve price rS below the revenue maximizing reserve price r0. Further, rPS. Hence, for a risk averse seller, public and secret reserve prices are ordered: cPS0.

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KW - Second-price auctions

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Reserve prices in auctions with entry when the seller is risk-averse

Abstract

Keywords

ASJC Scopus subject areas

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