Note on “Guarantees in Auctions: The Auction House as Negotiator and Managerial Decision Maker”
Published Online:1 Dec 2002https://doi.org/10.1287/mnsc.48.12.1640.441
Abstract
In this note, we identify two errors in Greenleaf, Rao, and Sinha's (1993) analysis of negotiation of guarantees in auctions. This note provides a high-level but self-contained summary of the revised results. We find that, in contrast with the earlier claim, guaranteed auctions lead to greater total expected revenue than conventional auctions. The ability to bargain over guarantee values and commissions certainly benefits sellers but may hurt the profits of auction houses. We relate these results to recent events in auction markets.
