Setting the reserve price for the Tracer DAO Gnosis auction

With Peyman Khezr

Introduction: Selling multiple units of a homogeneous good in an auction is one way of determining the market price. Uniform-price auctions have been used in many real-world markets because of their price discovery property: All winning bidders pay the same price (either highest losing bid or lowest winning bid). The question is how a seller could compute an optimal reserve price in a uniform price auction. First we should note that literature suggests a positive reserve price is usually better than no reserve price as it reduces the chance of underbidding by bidders. However, to compute the reserve price for a uniform price auction there are no clear criteria. In this note we follow the criteria given for the second-price auction as the best approximate of the uniform-price auction.

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