Bidding Off the Wall: Why Reserve Prices May Be Kept Secret

Vincent, D

doi:10.1006/jeth.1995.1021

Cited by 143 publications

(103 citation statements)

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“…Our model has the intuitive property that an additional bidder can be less valuable for the seller than her ability to optimally structure the selling mechanism. Thus, in contrast to the standard theory, our model is consistent with "lock-up" agreements 5 See, however, Vincent (1995) and Horstmann and LaCasse (1997), who argue that under certain circumstances secret reserve prices may be advantageous in common-value auctions. 6 In a first-price auction, the optimal bids depend on the reserve price.…”

Section: Introductionsupporting

confidence: 64%

Reserve Prices in Auctions as Reference Points

Rosenkranz

Schmitz

2007

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractWe consider second-price and first-price auctions in the symmetric independent private values framework. We modify the standard model by the assumption that the bidders have reference-based utility, where a publicly announced reserve price has some influence on the reference point. It turns out that the seller's optimal reserve price is increasing in the number of bidders. Also in contrast to the standard model, we find that secret reserve prices can outperform public reserve prices, and that setting the optimal reserve price can be more valuable for the seller than attracting additional bidders.

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Section: Introductionsupporting

confidence: 64%

Reserve Prices in Auctions as Reference Points

Rosenkranz

Schmitz

2007

SSRN Journal

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“…For these particular bidders the only possibility of winning is to win at the reserve price and this may occur only when the object is not worth purchasing. This possibility will discourage some bidders from participating (Vincent, 1995). A reserve price may also negatively impact auction success because certain bidders may engage in a price-aversion strategy (Tellis & Gaeth, 1990), seeking to avoid the risk of high expenses or losses (Kahneman & Tversky, 1979).…”

Section: Reserve Auctionmentioning

confidence: 96%

Determinants of internet auction success and closing price: An exploratory study

Gilkeson

Reynolds

2003

Psychology and Marketing

117

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Although auctions have been examined extensively in economics, and to some degree in marketing, on-line auctions are only beginning to receive research attention. Further, in both economics and marketing the research on auctions has relied primarily on rational, economic theories. This article investigates how particular on-line auction features impact two important outcomes: auction success and final closing price. Traditional economic theories as well as theories from marketing and psychology are employed to provide a broader picture of on-line auctions. Specifically, several key factors related to auction success and closing price for four types of sterling flatware in an on-line auction site (eBay) are examined. The findings show that, across all four piece types, a reserve auction format, the relative opening price, and the number of bids unexplained by a low or high opening price are associated with both auction success and final closing price. ᭧ 2003 Wiley Periodicals, Inc.Until recently, auctions were of interest to mostly economists and perhaps the very wealthy. The proliferation of on-line auctions has altered this situation considerably (Bazerman, 2001). To date there are several auction sites available on the Internet. Conceptually, auctions are tailor-made for an on-line format. Both sellers and bidders prefer high 538 GILKESON AND REYNOLDS volume -sellers want many potential bidders, and bidders want a large selection of whatever type of item they seek (Wilcox, 2000).The purpose of the research project described in this article is to examine several factors related to pricing in one on-line environmentan auction site. The specific focus is on what influences auction success (whether the auction results in a sale) and actual closing price. Several possible factors are considered, such as seller reputation, buyer experience, shipping and handling charges, and damage. The investigation also explores whether sellers obtain greater success and higher prices using reserves, higher opening bids, and longer auction length. The examination not only relies on rational, economic theories, but also employs broader theories from marketing and psychology.This article discusses preliminary results of an ongoing, exploratory research project that examines the results of auctions for sterling silver flatware conducted on eBay. Although the results discussed herein are based on 2628 auctions completed over the period October 28, 1999 through January 1, 2001, the collection of auction results continues.This article is organized as follows. First there is a brief review of the literature relating to auctions in general and on-line auctions. Next there is a discussion of the types of auction results that were collected and the process used. The next section contains research hypotheses based on theories from economics, marketing, and psychology. The data collected for the study are then summarized. This is followed by a description of the series of tests that were conducted to examine the factors that influenced...

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“…Vincent (1995) provides a theoretical rationale for secret reserve prices. An open policy of announced reserves would appear to have two advantages.…”

Section: Fdic Auctionsmentioning

confidence: 99%

How to Set Minimum Acceptable Bids, with an Application to Real Estate Auctions

McAfee¹,

Quan²,

Vincent³

2002

The J Industrial Economics

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Abstract:In a general auction model with affiliated signals, common components to valuations and endogenous entry, we compute the equilibrium bidding strategies and outcomes, and derive a lower bound on the optimal reserve price. This lower bound can be computed using data on past auction combined with information about the subsequent sales prices of unsold goods. We compute the lower bound using data from FDIC real estate auctions. We find the point estimate for an upper bound on the optimal reserve for real estate to be 75% of appraised value. Using data from private real estate auctions, we show that when reserve prices are around 50% of appraised value, seller revenues are increasing in the reserve price.

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Bidding Off the Wall: Why Reserve Prices May Be Kept Secret

Cited by 143 publications

References 0 publications

Reserve Prices in Auctions as Reference Points

Reserve Prices in Auctions as Reference Points

Determinants of internet auction success and closing price: An exploratory study

How to Set Minimum Acceptable Bids, with an Application to Real Estate Auctions

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