Decision Sciences
3 years ago

Optimal reserve prices in auctions tend to be low, benefiting sellers.

SSRN Electronic Journal
Robust Reserve Pricing in Auctions Under Mean Constraints
Ethan Che

Paper Summary

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The article explores how a seller can set a reserve price in an auction when they only know the average value of what bidders are willing to pay. They use a method to find the worst-case scenario for the distribution of bidders' valuations. The research shows that the best reserve price tends to be low and gets closer to zero as more bidders participate.