Buy-price English auction

A properly set buy price increases expected social welfare and the expected utility of each agent when either buyers or seller are risk-averse.

Abstract

Consider an English auction for a single object in which there is an option for a bidder to guarantee a purchase at a seller-specified buy price b at any time. We show that there exist v˜ and v^ (⩾v˜), such that a bidder purchases at the buy price immediately if his valuation v is no less than v^ or v˜⩽v<v^ and at least one other bidder is participating in the auction. If b⩽v<v˜, he purchases at the buy price once the current bid reaches a strategically chosen threshold price. A properly set buy price increases expected social welfare and the expected utility of each agent when either buyers or seller are risk-averse.