Some Evidence on Late Bidding in Ebay Auctions

Abstract

"Bidding in the last seconds or minutes of an auction is a common strategy in Internet auctions with fixed end-time. This paper examines the three explanations of late bidding in eBay auctions that survived the first scrutiny in Roth and Ockenfels (2002). There is no indication that late bidding could lead to collusive gains for bidders. Late bidding is a strategic response to the presence of bidders placing multiple bids. Experts protecting their private information are typically the last to bid, while collectors are often the first. As bidders gain familiarity with eBay rules, they tend to bid slightly earlier. "("JEL "D44) Copyright (c) 2007 Western Economic Association International.

eBay in the Economic Literature: Analysis of an Auction Marketplace

“…One can thus test for the difference between the two distribution of bids; and in their empirical study of a large number of eBay computer monitor auctions, Gonzalez et al find no significant difference in the two distributions. Wintr (2008) also confirms this result with a difference in medians test. Bajari and Hortaçsu (2003a) examine results from reduced form regressions that indicate that early bidding is not correlated with a high final sales price.…”

“…If some bidders bid incrementally, increasing their bid by the bidding increment until they are the high bidder, then it is always best to bid when those bidders cannot respond, which would occur during the sniping window (the last minute or seconds of a hard closing auction during which the bidders with the aim of sniping place their bids). Wintr (2008) shows in a field experiment that more incremental bidding leads to more sniping, which is consistent with this hypothesis. Ely and Hossain (2009) also confirm the simple explanation of Ockenfels and Roth (2006) and verify that sniping does have a small empirical benefit in field experiments.…”

Does Buyer Experience Pay Off? Evidence from eBay

“…Yet, sniping is observed to occur frequently in hard-close online auctions even among more experienced auction site users (Roth and Ockenfels 2002;Wintr 2008). Perhaps the most credible explanations for why experienced auction users engage in sniping involve the presence of some "naïve" users and/or imperfect information.…”

“…Specifically, sniping can be an optimal strategy for experienced users if they believe that some of the other users are incremental bidders. 4 Additionally, last minute bidding can be optimal for "experts" who want to protect their private valuation of the item (Roth and Ockenfels 2002;Wintr 2008). This is, however, more relevant in auctions where more expertise is required to value the item (Roth and Ockenfels 2002).…”

“…Incremental bidders may misunderstand the nature of second-price English auctions and try to maintain "winning bidder" status throughout the auction, change their willingness to pay during the course of the auction, or engage in "competitive arousal"(Wintr 2008). 5 "Herd" behavior bias is the tendency to follow and bid for items with a relatively large number of bids and ignore other comparable or more attractive auctions, which have not been bid upon.…”