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A theory of jump bidding in ascending auctions

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  • Isaac, R. Mark
  • Salmon, Timothy C.
  • Zillante, Arthur

Abstract

Jump bidding is a commonly observed phenomenon that involves bidders in ascending auctions submitting bids higher than required by the auctioneer. Such behavior is typically explained as due to irrationality or to bidders signaling their value. We present field data that suggests such explanations are unsatisfactory and construct an alternative model in which jump bidding occurs due to strategic concerns and impatience. We go on to examine the impact of jump bidding on the outcome of ascending auctions in an attempt to resolve some policy disputes in the design of ascending auctions.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 62 (2007)
Issue (Month): 1 (January)
Pages: 144-164

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Handle: RePEc:eee:jeborg:v:62:y:2007:i:1:p:144-164

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  1. Demange, Gabrielle & Gale, David & Sotomayor, Marilda, 1986. "Multi-Item Auctions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(4), pages 863-72, August.
  2. David Lucking-Reiley, 1999. "Using Field Experiments to Test Equivalence between Auction Formats: Magic on the Internet," American Economic Review, American Economic Association, American Economic Association, vol. 89(5), pages 1063-1080, December.
  3. Radosveta Ivanova-Stenzel & Timothy C. Salmon, 2004. "Bidder Preferences Among Auction Institutions," Experimental, EconWPA 0404005, EconWPA.
  4. Tilman Börgers & Christian Dustmann, 2005. "Strange Bids: Bidding Behaviour in the United Kingdom's Third Generation Spectrum Auction," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(505), pages 551-578, 07.
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  6. Avery, Christopher, 1998. "Strategic Jump Bidding in English Auctions," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 65(2), pages 185-210, April.
  7. Banks, Jeffrey & Olson, Mark & Porter, David & Rassenti, Stephen & Smith, Vernon, 2003. "Theory, experiment and the federal communications commission spectrum auctions," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 51(3), pages 303-350, July.
  8. Plott, Charles R. & Salmon, Timothy, 2002. "The Simultaneous, Ascending Auction: Dynamics of Price Adjustment in Experiments and in the U.K. 3G Spectrum Auction," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 1155, California Institute of Technology, Division of the Humanities and Social Sciences.
  9. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
  10. R. Isaac & Timothy Salmon & Arthur Zillante, 2005. "An experimental test of alternative models of bidding in ascending auctions," International Journal of Game Theory, Springer, Springer, vol. 33(2), pages 287-313, 06.
  11. Coppinger, Vicki M & Smith, Vernon L & Titus, Jon A, 1980. "Incentives and Behavior in English, Dutch and Sealed-Bid Auctions," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 18(1), pages 1-22, January.
  12. Paul Milgrom, . "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Working Papers, Stanford University, Department of Economics 98002, Stanford University, Department of Economics.
  13. Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, Econometric Society, vol. 56(3), pages 571-99, May.
  14. Rothkopf, Michael H. & Harstad, Ronald M., 1994. "On the role of discrete bid levels in oral auctions," European Journal of Operational Research, Elsevier, Elsevier, vol. 74(3), pages 572-581, May.
  15. Jason Shachat & J. Todd Swarthout, 2003. "Procurement Auctions for Differentiated Goods," Experimental Economics Center Working Paper Series, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University 2006-15, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University, revised Apr 2009.
  16. Ulrich Kamecke, 1993. "Dominance or Maximin: How to Solve an English Auction," Discussion Paper Serie A 418, University of Bonn, Germany.
  17. Smith, Vernon L, 1985. "Experimental Economics: Reply," American Economic Review, American Economic Association, American Economic Association, vol. 75(1), pages 264-72, March.
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Citations

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Cited by:
  1. Ricardo Gonçalves & John D Hey, 2007. "Experimental Evidence on English Auctions: Oral Outcry vs. Clock," Discussion Papers, Department of Economics, University of York 07/09, Department of Economics, University of York.
  2. Jason Shachat & J. Todd Swarthout, 2003. "Procurement Auctions for Differentiated Goods," Experimental, EconWPA 0310004, EconWPA.
  3. David Grether & David Porter & Matthew Shum, 2011. "Intimidation or Impatience? Jump Bidding in On-line Ascending Automobile Auctions," Working Papers 11-07, Chapman University, Economic Science Institute.
  4. Banerjee, Simanti & Shortle, James S. & Kwasnica, Anthony M., 2011. "An Iterative Auction for Spatially Contiguous Land Management: An Experimental Analysis," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania, Agricultural and Applied Economics Association 103220, Agricultural and Applied Economics Association.
  5. Carpenter, Jeffrey & Holmes, Jessica & Matthews, Peter Hans, 2011. "Jumping and sniping at the silents: Does it matter for charities?," Journal of Public Economics, Elsevier, Elsevier, vol. 95(5), pages 395-402.
  6. Plott, Charles R. & Salmon, Timothy, 2002. "The Simultaneous, Ascending Auction: Dynamics of Price Adjustment in Experiments and in the U.K. 3G Spectrum Auction," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 1155, California Institute of Technology, Division of the Humanities and Social Sciences.
  7. Douglas D. Davis & Laura Razzolini & Robert Reilly & Bart J. Wilson, 2003. "Raising Revenues for Charity: Auctions versus Lotteries," Working Papers 0301, VCU School of Business, Department of Economics.
  8. Steven Tucker & Charles Noussair & Anthony M. Kwasnica & Katerina Sherstyuk, 2013. "Multiunit Auctions," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 27(3), pages 461-490, 07.
  9. J. Todd Swarthout & Jason Shachat, 2004. "The performance of reverse auctions versus request for quotes when procuring goods with quality differences," Econometric Society 2004 North American Winter Meetings 255, Econometric Society.
  10. Brennan C. Platt & Joseph Price & Henry Tappen, 2010. "Pay-to-Bid Auctions," NBER Working Papers 15695, National Bureau of Economic Research, Inc.
  11. Ricardo Gonçalves, 2008. "A communication equilibrium in English auctions with discrete bidding," Working Papers de Economia (Economics Working Papers), Faculdade de Economia e Gestão, Universidade Católica Portuguesa (Porto) 042008, Faculdade de Economia e Gestão, Universidade Católica Portuguesa (Porto).
  12. Khoroshilov, Yuri, 2012. "Preemptive bidding in takeover auctions with affiliated values," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 52(4), pages 395-401.
  13. Katerina Sherstyuk, 2011. "Complexity and bidder behavior in iterative auctions," Economics Bulletin, AccessEcon, vol. 31(4), pages 2769-2776.
  14. repec:wyi:journl:002123 is not listed on IDEAS
  15. Yongfu He & Peter Popkowski Leszczyc, 2013. "The impact of jump bidding in online auctions," Marketing Letters, Springer, Springer, vol. 24(4), pages 387-397, December.
  16. Dror Lellouche & Assaf Romm, 2009. "Information Effects of Jump Bidding in English Auctions," Discussion Paper Series, The Center for the Study of Rationality, Hebrew University, Jerusalem dp526, The Center for the Study of Rationality, Hebrew University, Jerusalem.

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