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Sniping and Squatting in Auction Markets

  • Jeffrey C. Ely
  • Tanjim Hossain

We conducted a field experiment to test the benefit from late bidding (sniping) in online auction markets. We compared sniping to early bidding (squatting) in auctions for newly-released DVDs on eBay. Sniping led to a statistically significant increase in our average surplus. However, this improvement was small. The two bidding strategies resulted in a variety of other qualitative differences in the outcomes of auctions. We show that a model of multiple concurrent auctions, in which our opponents are naive or incremental bidders as identified in the lab, explain the results well. Our findings illustrate how the overall impact of naivete, and the benefit from sniping observed in the lab, may be substantially attenuated in real-world market settings. (JEL D44)

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Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

Volume (Year): 1 (2009)
Issue (Month): 2 (August)
Pages: 68-94

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Handle: RePEc:aea:aejmic:v:1:y:2009:i:2:p:68-94
Note: DOI: 10.1257/mic.1.2.68
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  1. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
  2. Dan Ariely & Axel Ockenfels & Alvin E. Roth, 2002. "An Experimental Analysis of Ending Rules in Internet Auctions," Papers on Strategic Interaction 2002-47, Max Planck Institute of Economics, Strategic Interaction Group.
  3. John A. List, 2007. "Field Experiments: A Bridge Between Lab and Naturally-Occurring Data," NBER Working Papers 12992, National Bureau of Economic Research, Inc.
  4. Tanjim Hossain, 2008. "Learning by bidding," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 509-529.
  5. Bajari, Patrick & Hortacsu, Ali, 2003. " The Winner's Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from eBay Auctions," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 329-55, Summer.
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