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Effects of minimum bid increment in internet auctions: Evidence from a field experiment

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  • Tukiainen, Janne

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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  • Tukiainen, Janne, 2013. "Effects of minimum bid increment in internet auctions: Evidence from a field experiment," Working Papers 44, VATT Institute for Economic Research.
    • Handle: RePEc:fer:wpaper:44
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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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    More about this item

    Keywords

    Field experiment; internet auctions; minimum bid increment; revenue; strategic bidding; Public services; Julkiset palvelut; Effectiveness of public services; Julkisten palvelujen vaikuttavuus; C520 - Model Evaluation and Testing; C720 - Noncooperative Games; C930 - Field Experiments; D440 - Auctions; L810 - Retail and Wholesale Trade; Warehousing; e-Commerce;
    All these keywords.

    JEL classification:

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

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