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A note on reserve price commitments in the Vickrey auction

Glowicka, Ela and Beck, Jonathan (2006): A note on reserve price commitments in the Vickrey auction.

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Abstract

This note provides a simple explanation why sellers rarely set optimal reserve prices in one-shot auctions. In a standard sealed-bid second-price auction, bidders with private values do not bid truthfully if the seller cannot commit to her announced reserve price. Consequently, expected revenue may be lower than without the announcement of a reserve price.

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