Reserve price signaling

Abstract: In a general auction model in which bidders' signals are affiliated, we characterize the unique separating equilibrium in which the seller can use reserve prices to credibly signal her private information. When the buyers' signals are independent, the optimal reserve price is shown to be increasing in the number of bidders under certain conditions. We also demonstrate that the probability that the item is sold at the reserve price can increase as the umber of bidders increases, which indicates a more central role for reserve prices than perceived in the standard auction models.

Keywords: Auctions; Reserve price; Signaling

Reserve price signaling.pdf