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Public versus Secret Reserve Prices in eBay Auctions: Results from a Pokémon Field Experiment

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Author Info
Rama Katkar (Graduate School of Business, Stanford University)
David Reiley (University of Arizona)
Abstract

Sellers in eBay auctions have the opportunity to choose both a public minimum bid amount and a secret reserve price. We ask, empirically, whether the seller is made better or worse off by setting a secret reserve above a low minimum bid, versus the option of making the reserve public by using it as the minimum bid level. In a field experiment, we auction 50 matched pairs of Pokémon cards on eBay, half with secret reserves and half with equivalently high public minimum bids. We find that secret reserve prices make us worse off as sellers, by reducing the probability of the auction resulting in a sale, deterring serious bidders from entering the auction and lowering the expected transaction price of the auction. We also present evidence that some sellers choose to use secret reserve prices for reasons other than increasing their expected auction prices.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Advances in Economic Analysis & Policy.

Volume (Year): 6 (2007)
Issue (Month): 2 ()
Pages: 1442-1442
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Handle: RePEc:bep:eapadv:v:6:y:2007:i:2:p:1442-1442

Note: oai:bepress:bejeap-1442
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Related research
Keywords: bidding minimum bid secret reserve

Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions

References listed on IDEAS
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  1. Patrick Bajari & Ali Hortacsu, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June. [Downloadable!] (restricted)
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This page was last updated on 2008-11-15.

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