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Frictions in internet auctions with many traders: A counterexample

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  • Donna, Javier
  • Schenone, Pablo
  • Veramendi, Gregory

Abstract

We show that when frictions are present, the Peters and Severinov (2006) (PS) bidding rule is no longer efficient nor a PBE of the PS game. Researchers should be cautious when using the PS bidding rule in markets with frictions like eBay.

Suggested Citation

  • Donna, Javier & Schenone, Pablo & Veramendi, Gregory, 2016. "Frictions in internet auctions with many traders: A counterexample," Economics Letters, Elsevier, vol. 138(C), pages 81-84.
    • Handle: RePEc:eee:ecolet:v:138:y:2016:i:c:p:81-84
    DOI: 10.1016/j.econlet.2015.11.033
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    1. Kevin Hasker & Robin Sickles, 2010. "eBay in the Economic Literature: Analysis of an Auction Marketplace," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 37(1), pages 3-42, August.
    2. Patrick Bajari & Ali Hortaçsu, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June.
    3. Donna, Javier D. & Schenone, Pablo & Veramendi, Gregory F., 2020. "Networks, frictions, and price dispersion," Games and Economic Behavior, Elsevier, vol. 124(C), pages 406-431.
    4. Anwar, Sajid & McMillan, Robert & Zheng, Mingli, 2006. "Bidding behavior in competing auctions: Evidence from eBay," European Economic Review, Elsevier, vol. 50(2), pages 307-322, February.
    5. Peters, Michael & Severinov, Sergei, 2006. "Internet auctions with many traders," Journal of Economic Theory, Elsevier, vol. 130(1), pages 220-245, September.
    6. Robert Zeithammer & Christopher Adams, 2010. "The Sealed-Bid Abstraction in Online Auctions," Marketing Science, INFORMS, vol. 29(6), pages 964-987, 11-12.
    7. Backus, Matthew R. & Podwol, Joseph Uri & Schneider, Henry S., 2014. "Search costs and equilibrium price dispersion in auction markets," European Economic Review, Elsevier, vol. 71(C), pages 173-192.
    8. Axel Ockenfels & David Reiley & Abdolkarim Sadrieh, 2006. "Online Auctions," NBER Working Papers 12785, National Bureau of Economic Research, Inc.
    9. Michael Chau & Xiao Fang & Olivia R. Liu Sheng, 2005. "Analysis of the query logs of a Web site search engine," Journal of the American Society for Information Science and Technology, Association for Information Science & Technology, vol. 56(13), pages 1363-1376, November.
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    Cited by:

    1. Donna, Javier D. & Schenone, Pablo & Veramendi, Gregory F., 2020. "Networks, frictions, and price dispersion," Games and Economic Behavior, Elsevier, vol. 124(C), pages 406-431.

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    More about this item

    Keywords

    Auctions; Internet; Frictions; Networks;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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