Rejection prices and an auctioneer with non-monotonic utility (Q6052992)

The goal of this paper is to study how an auctioneer who has a non-monotonic utility function with a unique maximizer can use the rejection price to increase expected utility in a first-price sealed-bid auction (FPA) and a second-price sealed-bid auction (SPA). In each auction we characterize a necessary and sufficient condition that by using the optimal rejection price not only the auctioneer but also bidders can be better of, compared to a standard auction. Finally, the preferences of the auctioneer over the two auctions are also studied. In Sect. 5, the author discuss a more general non-monotonic utility. All proofs of the propositions are given in the Appendix.