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

Listed author(s):
  • Katkar Rama

    ()

    (Graduate School of Business, Stanford University)

  • Reiley David H

    ()

    (University of Arizona)

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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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 5 (2007)
Issue (Month): 2 (January)
Pages: 1-25

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Handle: RePEc:bpj:bejeap:v:advances.6:y:2007:i:2:n:7
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