Do Auctioneers Pick Optimal Reserve Prices?

Andrew M. Davis, Elena Katok, Anthony M. Kwasnica · 2011

This study investigates how auctioneers set reserve prices in second-price sealed-bid auctions. A well-established theoretical result, assuming risk neutrality of the seller, is that the optimal reserve price should not depend on the number of participating bidders. In a set of controlled laboratory experiments, it is found that seller behavior often deviates from the theoretical benchmarks: sellers systematically increase their reserve prices as the number of bidders grows, contrary to standard auction theory.

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