Reserve Prices and Bidder Participation in an English Auction: The Case of Atlantic Cod in Norway

Summary

This study investigates the impact of reserve prices on bidder participation in the main Norwegian auction market
for frozen Atlantic cod. Theoretically, there is a negative relationship between reserve prices and bidder
participation. However, our empirical findings show that the reserve price actually has no negative influence
on bidder participation. A simulation exercise taking buyers’ true valuations into account also shows a negligible
effect of reserve prices on the probability of two or more participating bidders. Other factors are more important
in attracting bidders to the auction. Most notably, cod caught by longline, which implies fish of high
quality, enhances the probability of two or more bidders by 11.8%. Auctioneers should focus on information
transparency regarding fish quality to attract participants and hence improve the efficiency of auction markets.

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DOI : doi.org/10.1086/725003