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

Priyodorshi Banerjee, Shashwat Khare, Srikant P

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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.
Original languageEnglish
Article number79
JournalGames
Volume9
Issue number4
DOIs
Publication statusPublished - 9 Oct 2018

JEL classifications

  • c91 - Design of Experiments: Laboratory, Individual
  • d44 - Auctions

Keywords

  • reserve price
  • first-price auction
  • experience
  • seller learning

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