An experimental study of signaling in auctions with a flexible reserve price

• An experimental study of jump bidding in auctions with flexible reserve price.
• Jump bidding can be used as a signaling devise to pre-empt competition.
• When the seller can alter the reserve price, the signaling effect is reduced.

This paper presents the results of an experimental study of preemptive jump bidding in English auctions with a flexible reserve price. While one of the possible explanations for jump bidding is based on signaling arguments, the ability of the seller to adjust his decision to accept an offer based on the bidding history makes the existence of a signaling equilibrium questionable. This paper shows that the seller's ability to set the reserve price after observing the opening bid reduces both jump bidding behavior and the use and interpretation of opening bids as a signaling device.