Reserve Pricing At Single-Object Auctions

Authors: 
Robert C. Marshall, Jean-Francois Richard
Duke University

Nov 30 1988

At oral auctions it is frequently observed that auctioneers not only employ a "standard" reserve policy but, in addition, they use a retractable reserve. Specifically, if a bidder withdraws before the retractable reserve is reached then the auctioneer does not retain the item, but rather sells the item to the highest bidder. In this paper we demonstrate that a retractable reserve allows the auctioneer to exploit both affiliation of the valuations and risk aversion.

Manuscript: 

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