Sellers in eBay auctions have the opportunity to choose both
a public minimum bid amount and a secret reserve price. We ask,
empirically, whether the seller is made better or worse off by
setting a secret reserve above a low minimum bid, versus the option
of making the reserve public by using it as the minimum bid level.
In a field experiment, we auction 50 matched pairs of Pokémon
cards on eBay, half with secret reserves and half with equivalently
high public minimum bids. We find that secret reserve prices make
us worse off as sellers, by reducing the probability of the auction
resulting in a sale, deterring serious bidders from entering the
auction, and lowering the expected transaction price of the auction.
We also present evidence that some sellers choose to use secret
reserve prices for reasons other than increasing their expected
auction prices.
First version: July 2000
This version: April 2005
Return to David Reiley's Curriculum Vitae