The effects of competitive reserve prices in online auctions
ISSN: 0309-0566
Article publication date: 3 April 2018
Issue publication date: 21 June 2018
Abstract
Purpose
This paper aims to investigate how competition among online auction sellers influences the setting of both open and secret reserve prices, thereby affecting auction outcome.
Design/methodology/approach
Using a data set collected from eBay consisting of 787 identical product auctions, three empirical models have been proposed. Model 1 simultaneously estimates the effects of auction competition on a seller’s own open and secret reserve price strategies; Model 2 estimates the effects of auction competition on bidder participation; and Model 3 estimates the direct and indirect effects of auction competition on selling price.
Findings
Competition among sellers is central to shaping sellers’ reserve price strategies. When there are more concurrent auctions for identical items, sellers tend to specify a low open reserve and are less likely to set a secret reserve. Sellers are strongly influenced by competitors’ reserve price strategies, and tend to follow competition. Finally, auction competition and competitive reserve price strategies influence both bidder entry and selling prices.
Practical implications
This study has important implications for both sellers and bidders. It highlights the importance for sellers to adapt their reserve price strategies in light of their competitors’ reserve price strategies and offers implications for bidders regarding auction selection. An auction with low starting bid does not necessarily lead to a lower selling price as it attracts more bidders.
Originality/value
This paper focuses on competition among auction sellers, whereas previous literature has focused on competition among bidders. This paper is the first to study the impact of competing reserve prices in auctions.
Keywords
Acknowledgements
This research was supported by grants from the Social Sciences and Humanities Research Council of Canada and the Winspear Senior Faculty Fellowship, University of Alberta, School of Business. The authors thank Junjun Xie for helpful comments and for help with the data analyses and collection.
Citation
Han, J., Qiu, C. and Popkowski Leszczyc, P. (2018), "The effects of competitive reserve prices in online auctions", European Journal of Marketing, Vol. 52 No. 7/8, pp. 1439-1456. https://doi.org/10.1108/EJM-10-2017-0684
Publisher
:Emerald Publishing Limited
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