Reservation Values in Laboratory Auctions: Context and Bidding Behavior Theodore L. Turocy Department of Economics Texas A&M University College Station TX 77843 Elizabeth Watson Department of Economics Texas A&M University College Station TX 77843 13 July 2007 Abstract We show that bidding behavior in laboratory first-price private-values auctions is sen- sitive to the way the outcomes of the auction are presented. We embed the auction in a context in which each subject purchases an object each period. A bidder’s idiosyn- cratic reservation value is the price at which he will purchase a close substitute outside the auction market in the event he does not win the auction. A subject’s earnings for a period are computed as his total consumer surplus. This modification makes salient the price-probability tradeoff bidders face, which plays a central role in both theoret- ical and empirical work. Using this design, we find seller revenue to be significantly lower than has been consistently reported in the literature, even though the risk-neu- tral Bayes-Nash equilibrium remains unchanged. Keywords: first-price auctions, framing effects, methodology of experiments. 1 Introduction Laboratory experiments in economics intermediate between pure theory and empirical observations in the field. In the lab, experimenters observe the decisions of real, human agents, while being able to control at least some environmental variables. Whether implic- 1