Decision Sciences
4 years ago

Risk aversion boosts efficiency in auctions, favoring first-price over second-price.

Journal of Economic Theory
Risk aversion and optimal reserve prices in first- and second-price auctions
Audrey Hu, Steven A. Matthews, Liang Zou

Paper Summary

Related papers

Economics, Econometrics and Finance
8 years ago

Sellers Earn More from Sealed-Bid Auctions Over English Auctions for Land Sales

Credit Expansion
Mechanism Design
2 views
Decision Sciences
3 years ago

Optimal auction strategy boosts revenue and efficiency in competitive markets.

Mechanism Design
Economic Analysis
Market Dynamics
Decision Sciences
4 years ago

Fish as currency? Dual Dutch auction in Taipei flips traditional bidding.

Mechanism Design
2 views

Risk aversion affects how sellers set prices in auctions. Sellers with higher risk aversion choose lower reserve prices, especially in first-price auctions. Buyers' risk aversion also leads to lower reserve prices in first-price auctions, improving efficiency. Overall, first-price auctions are preferred by buyers in certain situations and by sellers.