Do auctioneers pick optimal reserve prices?

Andrew M. Davis, Elena Katok, Anthony M. Kwasnica

Research output: Contribution to journalArticlepeer-review

27 Scopus citations


We investigate how auctioneers set reserve prices in auctions. A well-established theoretical result, assuming risk neutrality of the seller, is that the optimal reserve price should not depend on the number of participating bidders. In a set of controlled laboratory experiments, we find that seller behavior often deviates from the theoretical benchmarks. We extend the existing theory to explore three alternative explanations for our results: risk aversion, anticipated regret, and probability weighting. After fitting our data to each of these models through parameter estimation techniques on both an aggregate and individual level, we find that all three models are consistent with some of the characteristics of our data, but that the regret model provides a slightly more favorable fit overall.

Original languageEnglish (US)
Pages (from-to)177-192
Number of pages16
JournalManagement Science
Issue number1
StatePublished - Jan 2011

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Management Science and Operations Research


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