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Reserve Price Formation in Online Auctions

Author

Listed:
  • Florian Englmaier
  • Arno Schmöller

Abstract

We use a unique hand collected data set of 6 258 auctions from the online football manager game Hattrick to study micro-patterns of reserve price formation. We find that chosen reserve prices exhibit both, very sophisticated and “irrational” behavior by the sellers. Reserve prices pick up the “birthday effect” in sales prices, documented in Englmaier and Schmöller (2008) and are adjusted remarkably nuanced to the resulting sales price pattern. Moreover, reserve prices are too clustered (around multiples of €50 000) as to be consistent with fully rational behavior. Furthermore, we find evidence for entitlement effects and the sunk cost fallacy as there is a huge positive effect on the reserve price when the player has been acquired previously.

Suggested Citation

  • Florian Englmaier & Arno Schmöller, 2008. "Reserve Price Formation in Online Auctions," CESifo Working Paper Series 2374, CESifo.
    • Handle: RePEc:ces:ceswps:_2374
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    References listed on IDEAS

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    Cited by:

    1. Ricardo Gonçalves, 2013. "Empirical Evidence on the Impact of Reserve Prices in E nglish Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 61(1), pages 202-242, March.

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    More about this item

    Keywords

    auctions; reserve price; bounded rationality; heuristics; entitlement effect;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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