Honestly, E being correct makes alot more sense when you understand that the stimulus is talking about the bidders submitting their auction bids in "strict confidence", meaning it's not like a traditional open auction where everyone sees everyone else's bids and judges accordingly. That's why E works, because if people don't know what other people are bidding and this item is claimed to be desirable, then they just might not even want to bid simply because they feel like the amount to win is more than they are willing to reasonably pay. And that's why the reserve price is necessary, because if there is, in fact, someone who does a token bid, then, well, the auctioneer might get screwed here if everyone else operates under the belief E is saying. The "strict confidence" part didn't really register to me the first time around, which is why I got it wrong, but now that I see it, I can see why E is correct.