This paper aims to estimate the effect of imposing a reserve price in repeated auctions of homogeneous items. I model the behavior of impatient bidders who search for the best auction outcome over time. The model is used to develop estimating equations for the bidders’ valuations, and to evaluate the effect of reserve prices on bids and revenue. Using data collected from surplus auctions of personal computer processors, I find economically significant gains from imposing a reserve price. The revenue-maximizing reserve price improves revenue by about 23% for a large subsample of the auctions in the data.
Review of Industrial Organization – Springer Journals
Published: Oct 12, 2011
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