Optimal Exclusion The Value of An Additional Bidder ∗

This paper introduces granting of “exclusive bidding rights ” to a subset buyers as a way of fostering their pre-auction information acquisition. A revenue maximizing monopolist gives N ef, the socially efficient number of informed buyers, or N ef + 1 buyers the exclusive right to bid, depending on a lumpsum value discovery (VD) cost. In the former case, equilibrium VD is efficient but allocation is ex-post inefficient while in the latter case it is the opposite (and participation in the auction is stochastic). Interestingly, the optimal reserve depends discontinuously and non-monotonically on the VD cost but is notably independent of endogenous information concerning VD