The effects of reserve prices on bidding behaviour in online auctions

Byline: Marla Royne Stafford, Ashley J. Kilburn, Barbara B. Stern The influence of reserve prices on bidder behaviour and bidding activity in online auction exchanges is examined. Risk perception theories provide rationale for considering reserve prices as risk-reducing cues in the uncertain environment of online auctions. The aim of this study is to examine the impact of reserve prices on online bidder strategy, and in this way contribute to understanding online consumer behaviour. To do so, we investigated buyers' bidding responses to items with and without a reserve price. A seller's decision to use a reserve price lowers the buyer's level of perceived risk such that bidding activity is stimulated and higher final bid prices result. Study results suggest a positive relationship between the use of reserve prices and number of bidders, number of bids and final bid prices.