Vecon Lab Two-Sided Auction with Seller-Determined Reserve Price

This is a two-sided auction in which one person in each group is a seller who sets a (public or secret) reserve price. The others are bidders, and the high bidder in each group earns the difference between the person's own value and their bid, providing that the bid exceeds the seller's reserve price. All other bidders earn zero for the round, unless bidders also receive a specified fraction of auction revenue. Seller earnings are based on auction revenues (fractional commissions are allowed). If the reserve price is not met, the seller may earn a "keep value." Both buyers and sellers have randomly generated private values, and the seller value can be set to $0, which corresponds to the usual, "must-sell" situation. In addition, the seller earns a specified fraction of the auction revenue in the event of a sale. The seller-revenue fraction is like a commission that can be used to equalize buyer and seller earnings.

The optimal reserve price, under risk neutrality,is independent of the number of bidders, which is the basis for the default class setup.

Vecon Lab - October 22, 2014