Bidding behaviors in eBay auctions: secret reservation price and endogenous entry

JIAO, FENG (2011): Bidding behaviors in eBay auctions: secret reservation price and endogenous entry. Published in: Journal of Economics and Behavioral Studies , Vol. 3, No. 5 (November 2011): pp. 326-331.

Abstract

This paper analyzes the secret reservation price in eBay auctions. Under the assumptions of secret and public reservation price, the bidders choose the optimal bidding function and the seller selects equilibrium reservation price. This model argues that the choice of secret reservation price is rational for the seller, as they can generate higher revenue in certain conditions. It predicts that, under endogenous entry, secret reservation price leads to higher revenue since it attracts more bidders to the auction. This effect is more noticeable for luxury goods. However, secret and public reservation prices generate identical revenue for the seller if entry is exogenous. Furthermore, the results are supported by numerous recent empirical works.

• Item Type: MPRA Paper
• Language: English
• Keywords: eBay, auctions, secret reservation prices, endogenous entry, mechanism design
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L16 - Industrial Organization and Macroeconomics: Industrial Structure and Structural Change ; Industrial Price Indices; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D44 - Auctions; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance

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