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Games 2018, 9(4), 79; https://doi.org/10.3390/g9040079

Learning to Set the Reserve Price Optimally in Laboratory First Price Auctions

1
Economic Research Unit, Indian Statistical Institute, Baranagar, Kolkata, West Bengal 700108, India
2
School of Business and Economics, Maastricht University, 6211 LK Maastricht, The Netherlands
3
Madras School of Economics, Chennai, Tamil Nadu 600025, India
*
Author to whom correspondence should be addressed.
Received: 17 September 2018 / Revised: 27 September 2018 / Accepted: 28 September 2018 / Published: 9 October 2018
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Abstract

We analyze choices of sellers, each setting a reserve price in a laboratory first price auction with automated equilibrium bidding. Subjects are allowed to gain experience for a fixed period of time prior to making a single payoff-relevant choice. Behavior of more experienced sellers was consistent with benchmark theory: average reserve price for these sellers was independent of the number of bidders and equaled the predicted level. Less experienced sellers however deviated from the theoretical benchmark: on average, they tended to shade reserve price below the predicted level and positively relate it to the number of bidders. View Full-Text
Keywords: reserve price; first-price auction; experience; seller learning reserve price; first-price auction; experience; seller learning
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Banerjee, P.; Khare, S.; Srikant, P. Learning to Set the Reserve Price Optimally in Laboratory First Price Auctions. Games 2018, 9, 79.

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