Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/329961 
Year of Publication: 
2022
Citation: 
[Journal:] Games [ISSN:] 2073-4336 [Volume:] 13 [Issue:] 4 [Article No.:] 50 [Year:] 2022 [Pages:] 1-7
Publisher: 
MDPI, Basel
Abstract: 
Reserve prices are used by sellers to modify the allocation induced by standard auctions. The existing literature has shown that, if the number of bidders is fixed, a reserve price can be used to increase expected revenues. This comes at the expense of efficiency when the auctioned good goes unsold. Instead, when the number of bidders is not fixed, a reserve price may discourage entry. The reduction in the number of bidders caused by the reserve price in this situation is detrimental for both revenues and efficiency. This work shows that a different conclusion may emerge when potential entrants arrive sequentially and face the risk of incurring losses conditional on winning the object on sale. In fact, we show that reserve prices may lead to more entry and raise the efficiency. Applications characterized by the presence of an incumbent who is better informed about some common characteristics of the object for sale may yield the type of features that are needed for our different conclusion to hold.
Subjects: 
auctions
English auction
entry
reserve prices
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
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