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Sniping and Squatting in Auction Markets

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  • Jeffrey C. Ely
  • Tanjim Hossain

Abstract

We conducted a field experiment to test the benefit from late bidding (sniping) in online auction markets. We compared sniping to early bidding (squatting) in auctions for newly-released DVDs on eBay. Sniping led to a statistically significant increase in our average surplus. However, this improvement was small. The two bidding strategies resulted in a variety of other qualitative differences in the outcomes of auctions. We show that a model of multiple concurrent auctions, in which our opponents are naive or incremental bidders as identified in the lab, explain the results well. Our findings illustrate how the overall impact of naivete, and the benefit from sniping observed in the lab, may be substantially attenuated in real-world market settings. (JEL D44)

Suggested Citation

  • Jeffrey C. Ely & Tanjim Hossain, 2009. "Sniping and Squatting in Auction Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 68-94, August.
    • Handle: RePEc:aea:aejmic:v:1:y:2009:i:2:p:68-94
    Note: DOI: 10.1257/mic.1.2.68
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    References listed on IDEAS

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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