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RAND Journal of Economics Vol. 42, No. 2, Summer 2011 pp. 313–336 Auctions with heterogeneous entry costs Diego Moreno∗ and John Wooders∗∗ If bidders have independent private values and homogeneous entry costs, a first- or second- price auction with a reserve price equal to the seller’s value maximizes social surplus and seller revenue. We show that if entry costs are heterogeneous and private information, then the revenue- maximizing reserve price is above the seller’s value, a positive admission fee (and a reserve price equal to the seller’s value) generates more revenue, and an entry cap combined with an admission fee generates even more revenue. Social surplus and seller revenue may either increase or decrease in the number of bidders, but they coincide asymptotically. 1. Introduction A classic result of the auction literature is that in a standard auction with an exogenously fixed number of bidders who have independent private values, maximizing seller revenue requires screening bidders; that is, the rules of the revenue-maximizing auction are such that a bidder whose value is below the screening value will find it unprofitable to bid. Moreover, the revenue- maximizing screening value is above the seller’s value and is independent of the number of bidders (see Myerson, 1981; Riley and Samuelson, 1981). In first- and second-price sealed-bid auctions, for example, the screening value is just the reserve price. Hence, the revenue-maximizing reserve price is above the seller’s value and is independent of the number of bidders. In many instances, however, the number of bidders is endogenously determined as the r