Reserve prices in repeated auctions

Reserve prices in repeated auctions I consider a model of repeated auctions in which the distribution of bidders’ values is only known to the bidders and the seller attempts to learn this distribution to inform her choice of reserve prices in the future. I find that in any equilibrium bidders will shade their bids to act as if their values are drawn from a lower distribution than they actually are. The bid shading may be so severe that the seller would prefer to simply commit to setting the reserve price that would be optimal if bidders’ values were drawn from the lowest possible distribution to eliminate the incentive for bidders to shade their bids. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Game Theory Springer Journals

Reserve prices in repeated auctions

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Publisher
Springer Berlin Heidelberg
Copyright
Copyright © 2017 by Springer-Verlag GmbH Germany
Subject
Economics; Economic Theory/Quantitative Economics/Mathematical Methods; Game Theory, Economics, Social and Behav. Sciences; Behavioral/Experimental Economics; Operations Research/Decision Theory
ISSN
0020-7276
eISSN
1432-1270
D.O.I.
10.1007/s00182-017-0587-5
Publisher site
See Article on Publisher Site

Abstract

I consider a model of repeated auctions in which the distribution of bidders’ values is only known to the bidders and the seller attempts to learn this distribution to inform her choice of reserve prices in the future. I find that in any equilibrium bidders will shade their bids to act as if their values are drawn from a lower distribution than they actually are. The bid shading may be so severe that the seller would prefer to simply commit to setting the reserve price that would be optimal if bidders’ values were drawn from the lowest possible distribution to eliminate the incentive for bidders to shade their bids.

Journal

International Journal of Game TheorySpringer Journals

Published: Aug 5, 2017

References

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