IDEAS home Printed from https://ideas.repec.org/p/usi/depfid/001.html
   My bibliography  Save this paper

Last minute bidding equilibrium in second price internet auctions

Author

Listed:
  • Nicola Dimitri

Abstract

In recent years internet auctions have attracted much attention. This paper discusses a possible explanation for empirical evidence, notably in fixed-end auctions such as eBay, showing a low number of offers early in the auction, with most of the bids concentrated towards the end of the auction. This “last minute bidding” (sniping) phenomenon was first investigated by Roth and Ockenfels (2002). Unlike standard auctions where each offer is processed by the auctioneer, due to system traffic and connection time in eBay close-end auctions very late bids may get lost and left unprocessed by the auction site. Based on this observation, in a simple two-player game theoretic model with private values, we analyze how the possibility that a bid might not be accepted by the system could affect bidders’ strategic decision to offer late. We find that late bidding, with no offer early in the auction, could be a Nash Equilibrium if players’ values for the object on sale are not too different, with the difference depending upon the relevant probabilities for last minute bids to be successfully placed.

Suggested Citation

  • Nicola Dimitri, 2007. "Last minute bidding equilibrium in second price internet auctions," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 001, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.
    • Handle: RePEc:usi:depfid:001
    as

    Download full text from publisher

    File URL: http://repec.deps.unisi.it/depfid/text1.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Bajari, Patrick & Hortacsu, Ali, 2003. "The Winner's Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from eBay Auctions," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 329-355, Summer.
    3. Ladislav Wintr, 2008. "Some Evidence On Late Bidding In Ebay Auctions," Economic Inquiry, Western Economic Association International, vol. 46(3), pages 369-379, July.
    4. Patrick Bajari & Ali Hortaçsu, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June.
    5. 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.
    6. Axel Ockenfels & Alvin E. Roth, 2001. "The Timing of Bids in Internet Auctions: Market Design, Bidder Behavior, and Artificial Agents," Papers on Strategic Interaction 2002-33, Max Planck Institute of Economics, Strategic Interaction Group.
    7. Patrick Bajari & Ali Hortacsu, 2002. "Cyberspace Auctions and Pricing Issues: A Review of Empirical Findings," Working Papers 02005, Stanford University, Department of Economics.
    8. Barbaro, Salvatore & Bracht, Bernd, 2021. "Shilling, Squeezing, Sniping. A further explanation for late bidding in online second-price auctions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    9. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nicola Dimitri, 2022. "Last minute only bidding is implausible in eBay sealed bid type-of-auctions," Electronic Commerce Research, Springer, vol. 22(2), pages 225-239, June.
    2. Axel Ockenfels & David Reiley & Abdolkarim Sadrieh, 2006. "Online Auctions," NBER Working Papers 12785, National Bureau of Economic Research, Inc.
    3. Barbaro, Salvatore & Bracht, Bernd, 2021. "Shilling, Squeezing, Sniping. A further explanation for late bidding in online second-price auctions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    4. Gary Bolton & Ben Greiner & Axel Ockenfels, 2013. "Engineering Trust: Reciprocity in the Production of Reputation Information," Management Science, INFORMS, vol. 59(2), pages 265-285, January.
    5. Ian Ayres & Mahzarin Banaji & Christine Jolls, 2015. "Race effects on eBay," RAND Journal of Economics, RAND Corporation, vol. 46(4), pages 891-917, October.
    6. Bolton, Gary E. & Ockenfels, Axel, 2014. "Does laboratory trading mirror behavior in real world markets? Fair bargaining and competitive bidding on eBay," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 143-154.
    7. 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.
    8. Axel Ockenfels, 2002. "New Institutional Structures on the Internet: The Economic Design of Online Auctions," Papers on Strategic Interaction 2002-08, Max Planck Institute of Economics, Strategic Interaction Group.
    9. Ladislav Wintr, 2008. "Some Evidence On Late Bidding In Ebay Auctions," Economic Inquiry, Western Economic Association International, vol. 46(3), pages 369-379, July.
    10. Glover, Brent & Raviv, Yaron, 2012. "Revenue non-equivalence between auctions with soft and hard closing mechanisms: New evidence from Yahoo!," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 129-136.
    11. Chen, Kong-Pin & Lai, Hung-pin & Yu, Ya-Ting, 2018. "The seller's listing strategy in online auctions: Evidence from eBay," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 107-144.
    12. Ingebretsen Carlson, Jim & Wu, Tingting, 2022. "Shill bidding and information in eBay auctions: A Laboratory study," Journal of Economic Behavior & Organization, Elsevier, vol. 202(C), pages 341-360.
    13. Taylor, Greg, 2012. "Defensive sniping and efficiency in simultaneous hard-close proxy auctions," Journal of Mathematical Economics, Elsevier, vol. 48(1), pages 51-58.
    14. Anna Adachi, 2016. "Competition in a Dynamic Auction Market: Identification, Structural Estimation, and Market Efficiency," Journal of Industrial Economics, Wiley Blackwell, vol. 64(4), pages 621-655, December.
    15. Ronald Peeters & Martin Strobel & Dries Vermeulen & Markus Walzl, 2016. "The Impact of the Irrelevant: Temporary Buy-Options and Bidding Behavior in Auctions," Games, MDPI, vol. 7(1), pages 1-19, March.
    16. 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.
    17. Robert Zeithammer & Christopher Adams, 2010. "The Sealed-Bid Abstraction in Online Auctions," Marketing Science, INFORMS, vol. 29(6), pages 964-987, 11-12.
    18. Bucklin, Randolph E. & Sismeiro, Catarina, 2009. "Click Here for Internet Insight: Advances in Clickstream Data Analysis in Marketing," Journal of Interactive Marketing, Elsevier, vol. 23(1), pages 35-48.
    19. Christopher Cotton, 2009. "Sniping to Avoid the Endowment E ect in Auctions," Working Papers 2010-13, University of Miami, Department of Economics.
    20. Sascha Füllbrunn, 2007. "Collusion or Sniping in simultaneous ascending Auctions," FEMM Working Papers 07025, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.

    More about this item

    Keywords

    eBay auctions; last minute bidding; congestion.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usi:depfid:001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Carlo Zappia (email available below). General contact details of provider: https://edirc.repec.org/data/dpsieit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.