Norman,

There is a big difference between a reserve and a shill bid.

A reserve is an up front statement by the seller that he will take no less for the item than what his reserve is. Even if the reserve amount is a secret, the bidder is not harmed as he will not have to purchase the item unless his bid exceeds the amount of the reserve.

On the other hand, a shill bid by another party gives the legitimate bidder a false sense that the item is more valuable than it might really be. The legitimate bidder sees that someone else is interested in the item also which leads to the conclusion that the item has a particular value to someone more than just himself. The effect is even greater if there is more than a single shill bidder.

Many times, especially with collectibles, the legitimate bidder might not have a good idea of an items true value, they just know that they like it. Shill bidding gives the person a false sense of value for the item which in many cases would cause them to be more comfortable bidding a higher amount.

A reserve price on an item doesn't have any of the same characteristics. You don't get the same perception of value from a reserve price. If an item has an undisclosed reserve of $500, and you an I and 2 or three others bid on the itme until it gets up to $350, we end up with a perception that the item is worth no more than $350 and that the reserve was more than the item was worth. No harm done to anyone. But, if a shill bidder or two was involved and the item reached a price of $600, we would have the perception that the item was probably worth $600.

As you can see, the reserve bid can do no harm to anyone, while the potential for harm is great with a shill bid. That is why it is illegal.

Greg