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Quantitative Finance · Glossary

What is English and Dutch auctions, reserve price?

Also known as: English auction · Dutch auction · reserve price

Definition 29.6 Quantitative Methods · Chapter 29 — Games, Auctions and Information

An English auction raises the price until one bidder remains, who pays the price at which the last rival dropped out. A Dutch auction lowers the price until a bidder accepts it. A reserve price is the lowest price at which the seller will sell.

Expected revenue of a standard auction with uniform private values against the reserve price; both curves peak at r* = 1/2. Data: the chapter’s tutorial (closed form, checked by simulation).
Figure 29.2. Expected revenue of a standard auction with uniform private values against the reserve price; both curves peak at r∗=12r^* = \frac12. Data: the chapter’s tutorial (closed form, checked by simulation).
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