Effects of minimum bid increment in internet auctions: Evidence from a field experiment
AbstractI study the role of minimum bid increments (MBI) in internet auctions using field experiment data. I sell identical gift cards while varying the MBI. Internet auctions have typically been viewed as second-price, implying truthful bidding. However, due to the presence of the MBI, equilibrium bidding behavior involves bid-shading. I test between truthful bidding and equilibrium bidding. Truthful bidding is rejected. Bidders conduct bid-shading in a pattern consistent with equilibrium bidding. I also report that the revenue maximizing level for the MBI is higher than zero and the eBay level is close to optimal. Moreover, a high MBI inefficiently limits entry.
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Bibliographic InfoPaper provided by Government Institute for Economic Research Finland (VATT) in its series Working Papers with number 44.
Date of creation: 15 Feb 2013
Date of revision:
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-23 (All new papers)
- NEP-COM-2013-03-23 (Industrial Competition)
- NEP-EXP-2013-03-23 (Experimental Economics)
- NEP-GTH-2013-03-23 (Game Theory)
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