Gradual Bidding in eBay-Like Auctions
AbstractThis paper shows that in online auctions like eBay, if bidders are not continuously participating in the auction but can only place bids at random times, then many different equilibria arise besides truthful bidding, despite the option to leave proxy bids. These equilibria can involve gradual bidding, periods of inactivity, and waiting to start bidding towards the end of the auction--bidding behaviors common on eBay. In a common value environment, we characterize a class of equilibria that include the best and worst equilibria for the seller. The revenue of the seller in the latter can be a small fraction of what could be obtained at a sealed-bid second-price auction. For large number of bidders, we show that the worst equilibrium has the feature that bidders are passive until near the end of the auction, and then they start bidding incrementally.
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Bibliographic InfoPaper provided by Duke University, Department of Economics in its series Working Papers with number 12-12.
Date of creation: 2012
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-06-05 (All new papers)
- NEP-CTA-2012-06-05 (Contract Theory & Applications)
- NEP-GTH-2012-06-05 (Game Theory)
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