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

This paper presents 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. They yielded data on a number of economic outcomes, including the number of participating bidders, the probability of sale, the levels of individual bids, and the auctioneerç—´ revenues. The benchmark theoretical model tested here is the classic auction model described by Riley and Samuelson (1981), with symmetric, risk-neutral bidders with independent private values. The data verify a number of the predictions of the theory. A particularly interesting result shows that many bidders behave strategically, anticipating the effects of the reserve price on others?bids.