In a procurement setting, when firms exit markets due to high costs, competition wavers, and the remaining bidders bid less aggressively, resulting in higher prices. The auctioneer’s problem could conceivably be modulated by a reserve price mechanism that uses the lowest bid from the previous period. In a single market, when bidders set the cap in the next period, they can pull back their bids and keep that bid cap from biting. If instead, bidders from another market set the cap, the incentive for strategic bidding is removed, and competition can potentially be restored. Using a controlled setting, we show how dynamics in reserve price setting influence bid shading and entry in multi-round auctions. We find that, without a bid cap, dampened competition does lead to higher prices after bidders exit. Imposing a dynamic bid cap solves this issue of higher prices but knocks more people out of markets, leading to widespread failure of auctions. Surprisingly, bidding behaviour remains similar across bid cap institutions during the first round. In subsequent rounds, bidding becomes deceptively more competitive in auctions with bid caps, but unexpectedly resulting in destroying markets.