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Effects of Minimum Bid Increments in Internet Auctions: Evidence from a Field Experiment

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  • Janne Tukiainen

Abstract

I study the role of minimum bid increments (MBI) in internet auctions using natural field experiment data from a Finnish online auction site Huuto.net. Internet auctions are typically viewed as secondprice, implying truthful bidding. However, due to the presence of the MBI, equilibrium bidding behavior involves bid shading. I sell otherwise identical gift cards while varying the MBI and test between truthful bidding and bid shading. Truthful bidding is rejected. Consistently with equilibrium behavior, bid shading increases as the MBI increases. This implies that real-world bidders are capable of reacting rationally even to seemingly small variations in their strategic environment. This version (September 17, 2015) replaces the February 15, 2013 version.
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  • Janne Tukiainen, 2017. "Effects of Minimum Bid Increments in Internet Auctions: Evidence from a Field Experiment," Journal of Industrial Economics, Wiley Blackwell, vol. 65(3), pages 597-622, September.
    • Handle: RePEc:bla:jindec:v:65:y:2017:i:3:p:597-622
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    2. Ola Andersson & Tommy Andersson, 2017. "Timing and presentation effects in sequential auctions," The Journal of Mechanism and Institution Design, Society for the Promotion of Mechanism and Institution Design, University of York, vol. 2(1), pages 39-55, December.

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    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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