Reservation Price Announcement in Sealed Bid Auctions

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This article compares the strategic announcement of a reservation price by a bid-taking buyer in a first-price sealed bid auction with the strategy of no announcement. Simulation results indicate that an operative ceiling price that is unknown to bidders will yield lower supply costs to the buyer than when the latter announces the reservation price truthfully. However, given enough bidders, the buyer can achieve an even lower expected cost of supply by announcing a falsely low reservation price.