Distributionally Robust Pricing in Auctions

24 Pages Posted: 17 Feb 2018

See all articles by Alex Suzdaltsev

Alex Suzdaltsev

Stanford Graduate School of Business

Date Written: February 6, 2018


Suppose that in a second-price auction, a seller wishes to set an optimal reserve price, but the information about the distribution of bidders’ iid valuations is scarce: the seller knows only an upper bound for valuations, the distribution’s mean, and, possibly, variance. I find reserve prices optimal in the sense of worst-case expected revenue maximization, where worst case is with respect to the unknown distribution. The optimal reserve price may not be unique, but the set of optimal prices always includes zero in the case when only mean is known.

Keywords: Auctions, Mechanism Design, Robustness, Distribution, Moment Constraints

JEL Classification: D44, D47, D80, D81, D82

Suggested Citation

Suzdaltsev, Aleksei, Distributionally Robust Pricing in Auctions (February 6, 2018). Available at SSRN: https://ssrn.com/abstract=3119305 or http://dx.doi.org/10.2139/ssrn.3119305

Aleksei Suzdaltsev (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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