Document Type
Discussion Paper
Publication Date
4-14-2025
CFDP Number
2438
CFDP Pages
51
Journal of Economic Literature (JEL) Code(s)
C91, D44, D47
Abstract
A soft-floor auction asks bidders to accept an opening price to participate in an ascending auction. If no bidder accepts, lower bids are considered using first-price rules. Soft floors are common despite being irrelevant with standard assumptions. When bidders regret losing, soft-floor auctions are more efficient and profitable than standard optimal auctions. Revenue increases as bidders are inclined to accept the opening price to compete in a regret-free ascending auction. Efficiency is improved since having a soft floor allows for a lower hard reserve price, reducing the frequency of no sale. Theory and experiment confirm these motivations from practice.
Recommended Citation
Bergemann, Dirk; Breuer, Kevin; Cramton, Peter; Hirsch, Jack; Ndiaye, Yero S.; and Ockenfels, Axel, "Soft-Floor Auctions: Harnessing Regret to Improve Efficiency and Revenue" (2025). Cowles Foundation Discussion Papers. 2850.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2850