Auction Form Preferences of Risk-Averse Bid Takers

RAND JOURNAL OF ECONOMICS, Vol. 29, no. 1, 1998

Posted: 23 Mar 1998

See all articles by Keith Waehrer

Keith Waehrer

Bates White Economic Consulting

Ron Harstad

University of Missouri

Michael H. Rothkopf

Rutgers University, Piscataway

Abstract

We analyze the preferences of a risk-averse seller over the class of "standard" auctions with symmetric and risk-neutral bidders. Assuming that buyers' private signals are independently distributed, we find that a sealed-bid first-price auction with an appropriately set reserve price is preferred by all risk-averse sellers to any other standard auction. In first- and second-price auctions, the more risk averse a seller, the lower the seller's optimal reserve price. Given two first-price auctions with reserve prices and entry fees such that both have the same screening level, all risk-averse sellers prefer the auction with the lower entry fee.

JEL Classification: D44, D82

Suggested Citation

Waehrer, Keith and Harstad, Ronald M and Rothkopf, Michael H., Auction Form Preferences of Risk-Averse Bid Takers. RAND JOURNAL OF ECONOMICS, Vol. 29, no. 1, 1998. Available at SSRN: https://ssrn.com/abstract=69828

Keith Waehrer (Contact Author)

Bates White Economic Consulting ( email )

2001 K Street, NW
North Building, Suite 500
Washington, DC 20006
United States

Ronald M Harstad

University of Missouri ( email )

United States

HOME PAGE: http://harstad.missouri.edu

Michael H. Rothkopf

Rutgers University, Piscataway ( email )

Rutgers Business School and RUTCOR
Rutcor Modular Bldg, Room 121
Piscataway, NJ 08854
United States
732-445-0266 (Phone)
732-445-5472 (Fax)

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