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How to Set Minimum Acceptable Bids, with an Application to Real Estate Auctions


Daniel C. Quan


Cornell University - School of Hotel Administration

R. Preston McAfee


Yahoo! Research Labs

Daniel R. Vincent


University of Maryland - Department of Economics

Journal of Industrial Economics, Forthcoming

Abstract:     
In a general auction model with affiliated signals, common components to valuations and endogenous entry, we compute the equilibrium bidding strategies and outcomes, and derive a lower bound on the optimal reserve price. This lower bound can be computed using data on past auctions combined with information about the subsequent sales prices of unsold goods. We illustrate how to compute the lower bound using data from real estate auctions.

Keywords: Auctions, Optimal Reserve Price, Real Estate

JEL Classification: D44

Accepted Paper Series


Date posted: September 13, 2002  

Suggested Citation

Quan, Daniel C., McAfee, R. Preston and Vincent, Daniel R., How to Set Minimum Acceptable Bids, with an Application to Real Estate Auctions. Journal of Industrial Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=314963

Contact Information

Daniel C. Quan (Contact Author)
Cornell University - School of Hotel Administration ( email )
442 Statler Hall
Ithaca, NY 14853-6902
United States
607-255-6404 (Phone)
607-255-1277 (Fax)
Randolph Preston McAfee
Yahoo! Research Labs ( email )
Pasadena, CA 91103
United States
Daniel R. Vincent
University of Maryland - Department of Economics ( email )
College Park, MD 20742
United States
301-405-3485 (Phone)
301-405-3542 (Fax)
Feedback to SSRN (Beta)


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