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Hassle costs in online auctions

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  • Guan, Junyan
  • Yang, Jin

Abstract

Online auctions have declined in popularity, often due to their high transaction costs. This paper focuses on one such cost: the hassle cost of bidding in often prolonged online auctions. We develop a structural model of ascending auctions with costly bidding that resembles a war of attrition. We show that even in private value settings, bidders strategically lower their bids to avoid hassle. Using data from a large online auto auction platform, we estimate that the average winner incurs hassle costs equivalent to 1.7% of the vehicle’s sale price, while sellers lose 5.0% in revenue due to bid-shading. Counterfactual simulations suggest that higher reserve prices can limit unproductive bidding and partially offset the loss.

Suggested Citation

  • Guan, Junyan & Yang, Jin, 2026. "Hassle costs in online auctions," International Journal of Industrial Organization, Elsevier, vol. 107(C).
    • Handle: RePEc:eee:indorg:v:107:y:2026:i:c:s0167718726000603
    DOI: 10.1016/j.ijindorg.2026.103308
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    Keywords

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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