Field Experiments on the Effects of Reserve Prices in Auctions: More Magic on the Internet

I present experimental evidence on the effects of minimum bids in first-price, sealed-bid auctions. The auction experiments manipulated the minimum bids in a preexisting market on the Internet for collectible trading cards from the game Magic: the Gathering. I examine a number of outcomes, including the number of participating bidders, the probability of sale, the levels of individual bids, and the auctioneerÕs revenues. The benchmark theoretical model is one with symmetric, riskneutral bidders with independent private values. The results verify a number of the predictions concerning equilibrium bidding. Many bidders behave strategically, anticipating the effects of the reserve price on others' bids.