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A theory of jump bidding in ascending auctions

  • Isaac, R. Mark
  • Salmon, Timothy C.
  • Zillante, Arthur

Jump bidding is a commonly observed phenomenon that involves bidders in ascending auctions submitting bids higher than required by the auctioneer. Such behavior is typically explained as due to irrationality or to bidders signaling their value. We present field data that suggests such explanations are unsatisfactory and construct an alternative model in which jump bidding occurs due to strategic concerns and impatience. We go on to examine the impact of jump bidding on the outcome of ascending auctions in an attempt to resolve some policy disputes in the design of ascending auctions.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 62 (2007)
Issue (Month): 1 (January)
Pages: 144-164

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Handle: RePEc:eee:jeborg:v:62:y:2007:i:1:p:144-164
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  1. Paul Milgrom, . "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Working Papers 98002, Stanford University, Department of Economics.
  2. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
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  10. Radosveta Ivanova-Stenzel & Timothy C. Salmon, 2004. "Bidder Preferences Among Auction Institutions," Experimental 0404005, EconWPA.
  11. 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.
  12. Banks, Jeffrey & Olson, Mark & Porter, David & Rassenti, Stephen & Smith, Vernon, 2003. "Theory, experiment and the federal communications commission spectrum auctions," Journal of Economic Behavior & Organization, Elsevier, vol. 51(3), pages 303-350, July.
  13. Smith, Vernon L, 1985. "Experimental Economics: Reply," American Economic Review, American Economic Association, vol. 75(1), pages 264-72, March.
  14. Coppinger, Vicki M & Smith, Vernon L & Titus, Jon A, 1980. "Incentives and Behavior in English, Dutch and Sealed-Bid Auctions," Economic Inquiry, Western Economic Association International, vol. 18(1), pages 1-22, January.
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  16. Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-99, May.
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