Robust Reserve Pricing in Auctions Under Mean Constraints

Abstract

We study a seller who sets a reserve price in a second price auction with uncertainty over the joint distribution of bidders' valuations. The seller only knows the mean of the marginal distribution of each bidder's valuation and the range, and an adversarial Nature chooses the worst-case distribution within this ambiguity set. We use a dual characterization to solve for this distribution. We find that the seller's optimal reserve price tends to be low and converges to zero in probability as the number of bidders increases.