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RESERVE PRICE EFFECTS IN AUCTIONS: ESTIMATES FROM MULTIPLE REGRESSION‐DISCONTINUITY DESIGNS
Author(s) -
Choi Syngjoo,
Nesheim Lars,
Rasul Imran
Publication year - 2016
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12226
Subject(s) - economics , regression discontinuity design , common value auction , reservation price , revenue , exploit , microeconomics , econometrics , finance , computer science , medicine , computer security , pathology
We present evidence from 260,000 online auctions of second‐hand cars to identify the impact of public reserve prices on auction outcomes. We exploit multiple discontinuities in the relationship between reserve prices and vehicle characteristics to present causal regression‐discontinuity estimates of reserve price impacts. We find an increase in reserve price decreases the number of bidders, increases the likelihood the object remains unsold, and increases expected revenue conditional on sale. We then combine these estimates to calibrate the reserve price effect on the auctioneer's ex ante expected revenue. This reveals the auctioneer's reserve price policy to be locally optimal. ( JEL D44, L11, L62)