Bidding off the Wall: Why Reserve Prices May Be Kept Secret.
Daniel R. Vincent ,
2
( 65 )
Journal of Economic Theory
575-584
April
1995
Abstract

This note shows by means of an example that in a common-value auction a seller with a random reservation value can increase her ex ante expected profits by following a policy of conducting an auction in which her reserve price is kept secret compared to an auction in which the reserve price is announced. By keeping the reserve price secret, the seller is able to encourage greater participation from the bidders and can, therefore, increase the linkage of the price paid to the value of the purchased object.

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