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Title:Reserve prices in auctions as reference points PDF Logo
Authors:Rosenkranz, Stephanie
Schmitz, Patrick W.
Issue Date:2005
Series/Report no.:Bonn econ discussion papers 2005,24
Abstract: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.
Subjects:Auction theory
reference-dependent utility
reserve prices
JEL:D44
D82
D81
Document Type:Working Paper
Appears in Collections:Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn

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