Published in

Wiley, RAND Journal of Economics, 2(46), p. 241-270, 2015

DOI: 10.1111/1756-2171.12085

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On absolute auctions and secret reserve prices

Journal article published in 2015 by Philippe Jehiel, Laurent Lamy
This paper was not found in any repository, but could be made available legally by the author.
This paper was not found in any repository, but could be made available legally by the author.

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Abstract

From a theory viewpoint, the use of auctions with zero public reserve prices, also called absolute auctions, or of auctions with secret reserve prices, is somewhat puzzling despite being common. By allowing that buyers differ in their processing of past data regarding how the participation rate varies with the auction format and how reserve prices are distributed when secret, we show in a competitive environment that these auction formats may endogenously emerge. We also analyze how buyers with various sophistications and sellers with various costs sort into the different formats, thereby offering a range of testable predictions. Alternative approaches are reviewed.