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To Bid or Not to Bid Aggressively? An Empirical Study

Author

Listed:
  • Philipp Herrmann

    (University of Paderborn)

  • Dennis O. Kundisch

    (University of Paderborn)

  • Mohammad S. Rahman

    (Purdue University)

Abstract

We analyze aggressive bidding, used as a strategy to intimidate auction competitors, with regards to its impact on the likelihood of winning an online auction. To answer our research question, we use a dataset containing actual market transaction records for approximately 7,000 online pay-per-bid auctions. Our research design allows us to isolate aggressive bids that are used in an attempt to deter other auction participants by signaling a high valuation. Thus, we can analyze the effects of this strategy on the probability of winning an auction. We find a significant negative effect of aggressive bidding on one’s likelihood of winning an auction. Our results suggest that aggressive bidding is not successful in deterring auction competitors. When comparing the effectiveness of different strategies, we find sniping to be up to seven times more effective than aggressive bidding.

Suggested Citation

  • Philipp Herrmann & Dennis O. Kundisch & Mohammad S. Rahman, 2013. "To Bid or Not to Bid Aggressively? An Empirical Study," Working Papers Dissertations 08, Paderborn University, Faculty of Business Administration and Economics.
    • Handle: RePEc:pdn:dispap:08
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Economics of IS; Internet Markets; Auctions; Bidding Strategies; Aggressive Bidding; Sniping; Information Revelation;
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