Selling a Dollar for More Than a Dollar? Evidence from Online Penny Auctions
AbstractOnline penny auctions, emerged recently, are seen as an adaptation of the famous dollar auction and as ?the evil stepchild of game theory and behavioral economics.?We use the complete bid and bidder history at a website to study if penny auctions can sustain excessive pro?fits over time. The overwhelming majority of new bidders lose money, but they quit quickly. A very small percentage of bidders are experienced and strategically sophisticated, but they earn substantial profi?ts. Our evidence thus suggests that penny auctions cannot sustain excessive pro?fits without attracting a revolving door of new customers who will lose money.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-13-15.
Date of creation: 30 May 2013
Date of revision:
behavioral game theory; behavioral industrial organization; auction; learning; strategic sophistication;
Find related papers by JEL classification:
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-20 (All new papers)
- NEP-CBE-2013-07-20 (Cognitive & Behavioural Economics)
- NEP-EXP-2013-07-20 (Experimental Economics)
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