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The Role Of The Bidding Process In Price Determination: Jump Bidding In Sequential English Auctions

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  • YARON RAVIV

Abstract

"This paper uses data collected from a series of public auctions of used cars in New Jersey to examine how strategic bidding affects price determination in open-outcry English auctions. "Jumps" in the bidding, which occur when a new offer exceeds the old offer by more than the minimum bid increment, are highly pervasive and consistently related to the item's presale estimated price. The size of the jumps is not affected by the selling order, however. This jump bidding pattern suggests that open-outcry auctions are more appropriately interpreted with models that assume common-item valuations rather than models assuming private valuations. "("JEL "D44) Copyright (c) 2007 Western Economic Association International.

Suggested Citation

  • Yaron Raviv, 2008. "The Role Of The Bidding Process In Price Determination: Jump Bidding In Sequential English Auctions," Economic Inquiry, Western Economic Association International, vol. 46(3), pages 325-341, July.
  • Handle: RePEc:bla:ecinqu:v:46:y:2008:i:3:p:325-341
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    References listed on IDEAS

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    1. Isaac, R. Mark & Salmon, Timothy C. & Zillante, Arthur, 2007. "A theory of jump bidding in ascending auctions," Journal of Economic Behavior & Organization, Elsevier, vol. 62(1), pages 144-164, January.
    2. Paarsch, Harry J., 1992. "Deciding between the common and private value paradigms in empirical models of auctions," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 191-215.
    3. Rothkopf, Michael H. & Harstad, Ronald M., 1994. "On the role of discrete bid levels in oral auctions," European Journal of Operational Research, Elsevier, vol. 74(3), pages 572-581, May.
    4. Philip A. Haile & Han Hong & Matthew Shum, 2003. "Nonparametric Tests for Common Values in First-Price Sealed-Bid Auctions," Cowles Foundation Discussion Papers 1445, Cowles Foundation for Research in Economics, Yale University.
    5. Robert F. Easley & Rafael Tenorio, 2004. "Jump Bidding Strategies in Internet Auctions," Management Science, INFORMS, vol. 50(10), pages 1407-1419, October.
    6. Plott, Charles R. & Salmon, Timothy C., 2004. "The simultaneous, ascending auction: dynamics of price adjustment in experiments and in the UK3G spectrum auction," Journal of Economic Behavior & Organization, Elsevier, vol. 53(3), pages 353-383, March.
    7. R. Isaac & Timothy Salmon & Arthur Zillante, 2005. "An experimental test of alternative models of bidding in ascending auctions," International Journal of Game Theory, Springer;Game Theory Society, vol. 33(2), pages 287-313, June.
    8. Tilman Börgers & Christian Dustmann, 2005. "Strange Bids: Bidding Behaviour in the United Kingdom's Third Generation Spectrum Auction," Economic Journal, Royal Economic Society, vol. 115(505), pages 551-578, July.
    9. Raviv, Yaron, 2006. "New Evidence on Price Anomalies in Sequential Auctions: Used Cars in New Jersey," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 301-312, July.
    10. R. Mark Isaac & Kurt Schnier, 2005. "Silent Auctions in the Field and in the Laboratory," Economic Inquiry, Western Economic Association International, vol. 43(4), pages 715-733, October.
    11. Philip A. Haile & Elie Tamer, 2003. "Inference with an Incomplete Model of English Auctions," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 1-51, February.
    12. Christopher Avery, 1998. "Strategic Jump Bidding in English Auctions," Review of Economic Studies, Oxford University Press, vol. 65(2), pages 185-210.
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    Cited by:

    1. Dodonova, Anna & Khoroshilov, Yuri, 2014. "Can preemptive bidding in takeover auctions be socially optimal? Yes it can," The North American Journal of Economics and Finance, Elsevier, vol. 27(C), pages 34-47.
    2. Dodonova, Anna, 2013. "Preemptive bidding in takeover auctions with externality," Journal of Economics and Business, Elsevier, vol. 69(C), pages 35-44.
    3. Yaron Raviv, 2009. "Uncertainty and Auction Outcomes: Evidence from Used Car Actions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(4), pages 327-347, June.
    4. Carpenter, Jeffrey & Holmes, Jessica & Matthews, Peter Hans, 2011. "Jumping and sniping at the silents: Does it matter for charities?," Journal of Public Economics, Elsevier, vol. 95(5), pages 395-402.
    5. Khoroshilov, Yuri, 2012. "Preemptive bidding in takeover auctions with affiliated values," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(4), pages 395-401.
    6. Wedad J. Elmaghraby & Elena Katok & Natalia Santamaría, 2012. "A Laboratory Investigation of Rank Feedback in Procurement Auctions," Manufacturing & Service Operations Management, INFORMS, vol. 14(1), pages 128-144, January.
    7. Khoroshilov, Yuri, 2015. "An experimental study of signaling in auctions with a flexible reserve price," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 124-137.

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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