Secret reserve prices in first-price auctions

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International Journal of Industrial Organization, ISSN: 0167-7187, Vol: 37, Issue: 1, Page: 65-74

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Frank Rosar
Elsevier BV
Engineering; Business, Management and Accounting
article description
This article offers a theoretical explanation for the use of secret reserve prices in auctions. I study first-price auctions with and without secret reserve price in an independent private values environment with risk-neutral buyers and a seller who cares at least minimally about risk. The seller can fix the auction rules either before or after she learns her reservation value. Fixing the rules early and keeping the right to set a secret reserve price can be strictly optimal. Moreover, I describe the relation of using a secret reserve price to phantom bidding and non-commitment to sell.