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Reservation Price Announcement In Sealed Bid Auctions: Comment, John R. Schroeter Aug 1996

Reservation Price Announcement In Sealed Bid Auctions: Comment, John R. Schroeter

Economic Staff Paper Series

In a 1993 paper in the Journal of Industrial Economics, Carey studies the problem of reservation price announcement in sealed bid procurement auctions. Assuming that the auctioneer/monopsonist has a self-supply option and is motivated by the desire to minimize the expected total cost of procurement, she investigates the auctioneer's decision to announce a reservation price and the level at which it should be set. Carey's analysis includes some errors, however. This comment proposes corrections. I begin by describing the auction setting.