Auctions with Limited Commitment
Qingmin Liu, Konrad Mierendorff, Xianwen Shi, Weijie Zhong
American Economic Review · 2019 · Volume 109 · Issue 3
Abstract
We study the role of limited commitment in a standard auction environment. In each period, the seller can commit to an auction with a reserve price but not to future reserve prices. We characterize the set of equilibrium profits attainable for the seller as the period length vanishes. An immediate sale by efficient auction is optimal when there are at least three buyers. For many natural distributions two buyers is enough. Otherwise, we give conditions under which the maximal profit is attained through continuously declining reserve prices.
Keywords
Auctions, Asymmetric and Private Information, Mechanism Design
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