ABSTRACT
Should a profit-maximising seller allow unrestricted competitive bidding by potential buyers or should she specify an upper limit on allowable bids? When placing a talented player with a sports club, can the player and his agent gain by specifying a cap on the acceptable salary? When outsourcing a public works contract, can a government agency lower expected costs by announcing a minimum price guarantee for the suppliers? In general, can one gain by putting limits on the share of the pie that one is willing to receive? We consider these questions in the context of a common value auction for a single object.
