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Optimal reservations prices and superior information in actions with common-value elements: evidence from field data

Author

Listed:
  • Richard Guy Cox

    (Department of Economics and Finance, College of Business, University of Arkansas)

Abstract

In an action the seller selects a reservation price to maximize expected revenue. Theory suggests that in some cases the seller can increase his expected revenue by raising his reservation price above his true valuation. We test this notion using a set of auctions on eBay where an active outside dealer market allows us to approximate the seller’s true valuation. We find that auctions with reservation prices marginally above the seller’s true valuation tend to result in higher revenue. We also find empirical support for the argument that bidders with superior information are less susceptible to the winner’s curse.

Suggested Citation

  • Richard Guy Cox, 2005. "Optimal reservations prices and superior information in actions with common-value elements: evidence from field data," Ekonomia, Cyprus Economic Society and University of Cyprus, vol. 8(2), pages 142-167, Winter.
  • Handle: RePEc:ekn:ekonom:v:8:y:2005:i:2:p:142-167
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    Cited by:

    1. Chen, Kong-Pin & Lai, Hung-pin & Yu, Ya-Ting, 2018. "The seller's listing strategy in online auctions: Evidence from eBay," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 107-144.

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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