Optimal Bidding with Announcement of the Reservation Price

Abstract

This paper is aimed at introducing a model of the symmetric Bayes-Nash equilibrium in a FPSB auction, when the auctioneer announces the reservation price known at all bidders. Following the specification of the ways in which the existing literature treats this matter and, in particular Carey (1993), it is established an alternative model based on the “nature’s move” tipical of bayesian games. Finally, in the conclusion, there is a treatment of the difference between the optimal bidding strategy which concludes this work and the one of Carey, after that the data have been made homogeneous for ease of comparison.