search query: @indexterm Optimal control theory / total: 44
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| Author: | Levin, D. Smith, J. L. |
| Title: | Optimal reservation prices in auctions. |
| Journal: | Economic Journal
1996 : SEP, VOL. 106:438, p. 1271-1283 |
| Index terms: | ECONOMETRIC MODELS AUCTIONS PRICES OPTIMAL CONTROL THEORY |
| Language: | eng |
| Abstract: | The risk-neutral independent-private-values (IPV) auction model produces curious results regarding the use of reservation prices: no matter how many bidders, the seller should announce a fixed reservation prices above his true value. This is notable since the seller gains by adopting an inefficient institution, and puzzling because it conflicts with common practice. The authors relax the IPV assumption, characterise optimal reservation prices in a richer class of auctions, and show that when information is correlated the seller's optimal reservation price converges to his true value, often monotonically and rapily, as the number of bidders grows. |
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