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Learning to Set the Reserve Price Optimally in Laboratory First Price Auctions

Author

Listed:
  • Priyodorshi Banerjee

    (Economic Research Unit, Indian Statistical Institute, Baranagar, Kolkata, West Bengal 700108, India)

  • Shashwat Khare

    (School of Business and Economics, Maastricht University, 6211 LK Maastricht, The Netherlands)

  • P. Srikant

    (Madras School of Economics, Chennai, Tamil Nadu 600025, India)

Abstract

We analyze choices of sellers, each setting a reserve price in a laboratory first price auction with automated equilibrium bidding. Subjects are allowed to gain experience for a fixed period of time prior to making a single payoff-relevant choice. Behavior of more experienced sellers was consistent with benchmark theory: average reserve price for these sellers was independent of the number of bidders and equaled the predicted level. Less experienced sellers however deviated from the theoretical benchmark: on average, they tended to shade reserve price below the predicted level and positively relate it to the number of bidders.

Suggested Citation

  • Priyodorshi Banerjee & Shashwat Khare & P. Srikant, 2018. "Learning to Set the Reserve Price Optimally in Laboratory First Price Auctions," Games, MDPI, vol. 9(4), pages 1-16, October.
    • Handle: RePEc:gam:jgames:v:9:y:2018:i:4:p:79-:d:174303
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    References listed on IDEAS

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    Cited by:

    1. Mihail Busu & Cristian Busu, 2021. "Detecting Bid-Rigging in Public Procurement. A Cluster Analysis Approach," Administrative Sciences, MDPI, vol. 11(1), pages 1-14, February.

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