For me, the problem happens when the reserve is not within the range that the property is advertised.
Here's my suggestion - ensure that the vendor's reserve is within the price range. So that if the property is presented as between $950K - $1,050 then the price the property is "on the market" within that range. No problem whatever if the property goes for a lot more, because there are four keen families bidding. Good on the vendor.
For me, the problem happens when the reserve is not within the range that the property is advertised. If we have to change the regulations so that the range is wider - say $950K - to $1,250 that should be OK. The prospective buyers should know that the reserve is within the range. Not like auctions I have attended where we find out during the auction that the advertised range is $200K less than the reserve.
Oh, and as a vendor you have up to 10 days before the auction to alter your range and reserve, so anyone who attends the auction knows the range at which the property will be on the market. And isn't wasting his/her time to attend the auction. If s/he is outbid at auction, too bad.
But that's not deliberately caused by the vendor or agent dragging people into an auction on false assumptions, which they know to be false.