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Sniping to Avoid the Endowment E ect in Auctions

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  • Christopher Cotton

    (Department of Economics, University of Miami)

Abstract

An endowment effect can result in both multiple bidding and sniping in auctions. It can cause players to bid multiple times and overpay for items. Sniping is a rational response for experienced bidders looking to avoid the endowment effect.

Suggested Citation

  • Christopher Cotton, 2009. "Sniping to Avoid the Endowment E ect in Auctions," Working Papers 2010-13, University of Miami, Department of Economics.
    • Handle: RePEc:mia:wpaper:2010-13
    as

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    File URL: https://herbert.miami.edu/_assets/files/repec/wp-2010-13.pdf
    File Function: First version, 2009
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    References listed on IDEAS

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    1. Patrick Bajari & Ali Hortaçsu, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June.
    2. Botond Kőszegi & Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1133-1165.
    3. Cotton, Christopher, 2009. "Multiple bidding in auctions as bidders become confident of their private valuations," Economics Letters, Elsevier, vol. 104(3), pages 148-150, September.
    4. Ockenfels, Axel & Roth, Alvin E., 2006. "Late and multiple bidding in second price Internet auctions: Theory and evidence concerning different rules for ending an auction," Games and Economic Behavior, Elsevier, vol. 55(2), pages 297-320, May.
    5. Dan Ariely & Axel Ockenfels & Alvin E. Roth, 2005. "An Experimental Analysis of Ending Rules in Internet Auctions," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 890-907, Winter.
    6. Tanjim Hossain, 2008. "Learning by bidding," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 509-529, June.
    7. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-1348, December.
    8. 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.
    9. Eddie Dekel & Barton L. Lipman & Aldo Rustichini, 1998. "Standard State-Space Models Preclude Unawareness," Econometrica, Econometric Society, vol. 66(1), pages 159-174, January.
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    11. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September.
    12. Robert Wilson, 1977. "A Bidding Model of Perfect Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 511-518.
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    Cited by:

    1. März, Armin & Lachner, Michael & Heumann, Christian G. & Schumann, Jan H. & von Wangenheim, Florian, 2021. "How You Remind Me! The Influence of Mobile Push Notifications on Success Rates in Last-Minute Bidding," Journal of Interactive Marketing, Elsevier, vol. 54(C), pages 11-24.
    2. Carpenter, Jeffrey & Holmes, Jessica & Matthews, Peter Hans, 2011. "Jumping and sniping at the silents: Does it matter for charities?," Journal of Public Economics, Elsevier, vol. 95(5-6), pages 395-402, June.
    3. Matthew Backus & Thomas Blake & Dimitriy V. Masterov & Steven Tadelis, 2017. "Expectation, Disappointment, and Exit: Reference Point Formation in a Marketplace," NBER Working Papers 23022, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    auction; eBay; multiple bidding; sniping; endowment effect;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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