Rejection prices and an auctioneer with non-monotonic utility

Abstract

This paper considers an auctioneer who has a non-monotonic utility function with a unique maximizer. The auctioneer is able to reject all bids over some amount by using rejection prices. We show that the optimal rejection price for such an auctioneer is lower than and equal to that maximizer in first-price and second-price sealed-bid auctions, respectively. Further, 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 off, compared to a standard auction.