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An Experimental Analysis of Ending Rules in Internet Auctions

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Author Info

  • Dan Ariely

    ()
    (Massachusetts Institute of Technology)

  • Axel Ockenfels

    ()
    (University of Cologne)

  • Alvin E. Roth

    ()
    (Harvard University)

Abstract

A great deal of late bidding has been observed on eBay, which employs a second-price auction with a fixed deadline. Much less late bidding has been observed on Amazon, which can only end when ten minutes have passed without a bid. In controlled experiments, we find that the difference in the ending rules is sufficient by itself to produce the differences in late bidding observed in the field data. The data also allow us to examine bid amounts in relation to private values, and how behavior is shaped by the different opportunities for learning provided in the auction conditions.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 36 (2005)
Issue (Month): 4 (Winter)
Pages: 890-907

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Handle: RePEc:rje:randje:v:36:y:2005:4:p:890-907

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References

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  1. Elliott Peranson & Alvin E. Roth, 1999. "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," American Economic Review, American Economic Association, vol. 89(4), pages 748-780, September.
  2. Patrick Bajari & Ali Hortacsu, 2000. "Winner's Curse, Reserve Prices and Endogenous Entry: Empirical Insights from eBay Auctions," Econometric Society World Congress 2000 Contributed Papers 1927, Econometric Society.
  3. Rasmusen Eric Bennett, 2006. "Strategic Implications of Uncertainty over One's Own Private Value in Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 6(1), pages 1-22, November.
  4. Roth, Alvin E. & Erev, Ido, 1995. "Learning in extensive-form games: Experimental data and simple dynamic models in the intermediate term," Games and Economic Behavior, Elsevier, vol. 8(1), pages 164-212.
  5. Alvin E. Roth, 2002. "The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics," Econometrica, Econometric Society, vol. 70(4), pages 1341-1378, July.
  6. Christopher Avery & Christine Jolls & Richard Posner & Alvin E. Roth, 2007. "The New Market for Federal Judicial Law Clerks," NBER Working Papers 13213, National Bureau of Economic Research, Inc.
  7. Simon Gächter & Arno Riedl, . "Moral Property Rights in Bargaining," IEW - Working Papers 113, Institute for Empirical Research in Economics - University of Zurich.
  8. Roth, Alvin E & Xing, Xiaolin, 1994. "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review, American Economic Association, vol. 84(4), pages 992-1044, September.
  9. Haruvy, Ernan & Roth, Alvin E. & Unver, M. Utku, 2006. "The dynamics of law clerk matching: An experimental and computational investigation of proposals for reform of the market," Journal of Economic Dynamics and Control, Elsevier, vol. 30(3), pages 457-486, March.
  10. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  11. 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.
  12. Gary Bolton & Elena Katok & Axel Ockenfels, 2002. "How Effective are Online Reputation Mechanisms?," Papers on Strategic Interaction 2002-25, Max Planck Institute of Economics, Strategic Interaction Group.
  13. John H. Kagel & Alvin E. Roth, 2000. "The Dynamics Of Reorganization In Matching Markets: A Laboratory Experiment Motivated By A Natural Experiment," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 201-235, February.
  14. Posner, Richard A. & Avery, Christopher & Jolls, Christine & Roth, Alvin, 2001. "The Market for Federal Judicial Law Clerks," Scholarly Articles 2623748, Harvard University Department of Economics.
  15. Paul R. Milgrom, 1985. "Auction Theory," Cowles Foundation Discussion Papers 779, Cowles Foundation for Research in Economics, Yale University.
  16. Nick Feltovich, 2000. "Reinforcement-Based vs. Belief-Based Learning Models in Experimental Asymmetric-Information," Econometrica, Econometric Society, vol. 68(3), pages 605-642, May.
  17. 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.
  18. Kagel, John H & Harstad, Ronald M & Levin, Dan, 1987. "Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study," Econometrica, Econometric Society, vol. 55(6), pages 1275-1304, November.
  19. Alvin E. Roth & Axel Ockenfels, . "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," Papers on Strategic Interaction 2002-32, Max Planck Institute of Economics, Strategic Interaction Group.
  20. Roth, Alvin E & Murnighan, J Keith & Schoumaker, Francoise, 1988. "The Deadline Effect in Bargaining: Some Experimental Evidence," American Economic Review, American Economic Association, vol. 78(4), pages 806-23, September.
  21. Werner Güth & Maria Vittoria Levati & Boris Maciejovsky, 2001. "Deadline Effects in Ultimatum Bargaining: An Experimental Study of Concession Sniping with Low or no Costs of Delay," Papers on Strategic Interaction 2001-01, Max Planck Institute of Economics, Strategic Interaction Group.
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