  We study reserve prices in auctions with independent private values when
bidders are expectations-based loss averse. We find that the optimal public
reserve price excludes fewer bidder types than under risk neutrality. Moreover,
we show that public reserve prices are not optimal as the seller can earn a
higher revenue with mechanisms that better leverage the ``attachment effect''.
We discuss two such mechanisms: i) an auction with a secrete and random reserve
price, and ii) a two-stage mechanism where an auction with a public reserve
price is followed by a negotiation if the reserve price is not met. Both of
these mechanisms expose more bidders to the attachment effect, thereby
increasing bids and ultimately revenue.
