Working Paper: CEPR ID: DP10486
Authors: Syngjoo Choi; Lars Nesheim; Imran Rasul
Abstract: 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 RD 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.
Keywords: auctions; regression discontinuity; reserve price
JEL Codes: D44; L11; L62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increase in reserve price (D44) | Decrease in number of actual bidders (D44) |
| Increase in reserve price (D44) | Increase in probability of object remaining unsold (D44) |
| Increase in reserve price (D44) | Increase in expected revenue conditional on sale (G19) |