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Field Experiments on the Effects of Reserve Prices in Auctions: More Magic on the Internet

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  • David Reiley

    (University of Arizona)

Abstract

I present experimental evidence on the effects of minimum bids in first-price, sealed-bid auctions. The auction experiments manipulated the minimum bids in a preexisting market on the Internet for collectible trading cards from the game Magic: the Gathering. I examine a number of outcomes, including the number of participating bidders, the probability of sale, the levels of individual bids, and the auctioneerÕs revenues. The benchmark theoretical model is one with symmetric, riskneutral bidders with independent private values. The results verify a number of the predictions concerning equilibrium bidding. Many bidders behave strategically, anticipating the effects of the reserve price on others' bids.

Suggested Citation

  • David Reiley, 2006. "Field Experiments on the Effects of Reserve Prices in Auctions: More Magic on the Internet," RAND Journal of Economics, The RAND Corporation, vol. 37(1), pages 195-211, Spring.
    • Handle: RePEc:rje:randje:v:37:y:2006:1:p:195-211
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    Cited by:

    1. Christopher Boyer & B. Brorsen & Tong Zhang, 2014. "Common-value auction versus posted-price selling: an agent-based model approach," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 9(1), pages 129-149, April.
    2. Bolton, Gary E. & Ockenfels, Axel, 2014. "Does laboratory trading mirror behavior in real world markets? Fair bargaining and competitive bidding on eBay," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 143-154.
    3. Burtraw, Dallas & Palmer, Karen, 2006. "Summary of the Workshop to Support Implementing the Minimum 25 Percent Public Benefit Allocation in the Regional Greenhouse Gas Initiative," RFF Working Paper Series dp-06-45, Resources for the Future.

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