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Distributionally robust pricing in independent private value auctions

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  • Suzdaltsev, Alex

Abstract

A seller chooses a reserve price in a second-price auction to maximize worst-case expected revenue when she knows only the mean of value distribution and an upper bound on either values themselves or variance. Values are private and iid. Using an indirect technique, we prove that it is always optimal to set the reserve price to the seller's own valuation. However, the maxmin reserve price may not be unique. Sometimes it is optimal to choose a deterministic reserve price even when randomization is allowed, which is unusual for maxmin settings. A second-price auction with the reserve equal to seller's value is an asymptotically optimal mechanism (among all ex post individually rational mechanisms) as the number of bidders grows without bound.

Suggested Citation

  • Suzdaltsev, Alex, 2022. "Distributionally robust pricing in independent private value auctions," Journal of Economic Theory, Elsevier, vol. 206(C).
    • Handle: RePEc:eee:jetheo:v:206:y:2022:i:c:s0022053122001454
    DOI: 10.1016/j.jet.2022.105555
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    Cited by:

    1. Wei He & Jiangtao Li & Weijie Zhong, 2024. "Rank-Guaranteed Auctions," Papers 2408.12001, arXiv.org.
    2. Sosung Baik & Sung-Ha Hwang, 2022. "Revenue Comparisons of Auctions with Ambiguity Averse Sellers," Papers 2211.12669, arXiv.org.
    3. Shixin Wang, 2024. "Semi-Separable Mechanisms in Multi-Item Robust Screening," Papers 2408.13580, arXiv.org.

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    More about this item

    Keywords

    Robust mechanism design; Worst-case objective; Auctions; Moments problems;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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