No-Trade in Second-Price Auctions with Entry Costs and Secret Reserve Prices

8 Pages Posted: 7 Jun 2016 Last revised: 23 Sep 2018

See all articles by Stefano Lovo

Stefano Lovo

HEC Paris - Finance Department

Christophe Spaenjers

HEC Paris - Finance Department

Date Written: May 9, 2017

Abstract

We consider a second-price private-value auction in the presence of an exogenous participation cost and a secret reserve price endogenously set by the seller. We show that, if the entry cost is strictly positive, the only equilibrium outcome is that the seller chooses a reserve price that deters entry and no buyer enters.

Keywords: auctions; entry; participation costs; reserve prices; no-trade equilibria

JEL Classification: D44

Suggested Citation

Lovo, Stefano and Spaenjers, Christophe, No-Trade in Second-Price Auctions with Entry Costs and Secret Reserve Prices (May 9, 2017). Economics Letters, Vol. 156, July 2017. Available at SSRN: https://ssrn.com/abstract=2790811 or http://dx.doi.org/10.2139/ssrn.2790811

Stefano Lovo

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Christophe Spaenjers (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

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