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

We analyze choices of sellers, each setting a reserve price in a laboratory first price 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 equalled 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