Vickrey auctions with reserve pricing

Abstract

We generalize the Vickrey auction to allow for reserve pricing in a multiple item auction with interdependent values. By withholding quantity in some circumstances, the seller can improve revenues or mitigate collusion. In the Vickrey auction with reserve pricing, the seller determines the quantity to be made available as a function of the bidders' private information, and then efficiently allocates this quantity among the bidders. Truthful bidding is a dominant strategy with private values and an ex post equilibrium with interdependent values. If the auction is followed by resale, then truthful bidding remains an equilibrium in the auction-plus-resale game. In settings where resale exhausts all the gains from trade among the bidders, the Vickrey auction with reserve pricing maximizes seller revenues.