Auction Form Preferences of Risk-Averse Bid Takers
RAND JOURNAL OF ECONOMICS, Vol. 29, no. 1, 1998
Posted: 23 Mar 1998
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: Suggested Citation