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

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

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We analyze choices of sellers, each setting a reserve price in a laboratory first price 4 Piece Queen Poster Bed 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 Drying Mat 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.