Ashoka University

Consider a finite set of potential bidders for the sale of an indivisible object where every bidder has an outside option. Bidders have private information about the object’s value and their outside option which are drawn from two different probability distributions. Every bidder participates in the auction if and only if their value for the object is larger than their outside option, which leads to uncertain number of participants. The seller imposes a floor on the number of participating bidders in order to conduct an auction. If the floor is not met, the auction is canceled. We show that if either the value distribution is strengthened or the outside option distribution is weakened, the bidders raise their bids. We also show that the bidders raise their bids due to the imposition of a floor.