Public Versus Secret Reserve Prices in eBay Auctions: Results from a Pokemon Field Experiment

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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 Pok‚mon 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.

Published: Katkar, Rama and David H. Reiley. "Public Versus Secret Reserve Prices in eBay Auctions: Results from a Pokemon Field Experiment." B.E. Journal of Economic Analysis and Policy: Advances in Economic Analysis and Policy 6, 2 (2006): 1-23.

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