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Shills and Snipes

Author

Listed:
  • Subir Bose

    (University of Leicester)

  • Arup Daripa

    (Department of Economics, Mathematics & Statistics, Birkbeck)

Abstract

Online auctions with a fixed end-time often experience a sharp increase in bidding towards the end despite using a proxy-bidding format. We provide a novel explanation of this phenomenon under private values. We study a correlated private values environment in which the seller bids in her own auction (shill bidding). Bidders selected randomly from some large set arrive randomly in an auction, then decide when to bid (possibly multiple times) over a continuous time interval. A submitted bid arrives over a continuous time interval according to some stochastic distribution. The auction is a continuous-time game where the set of players is not commonly known, a natural setting for online auctions. We show that there is a late-bidding equilibrium in which bids are delayed to the latest instance involving no sacrifice of probability of bid arrival, but shill bids fail to arrive with positive probability, and in this sense optimal late bidding serves to snipe the shill bids. We show conditions under which the equilibrium outcome is unique. Our results suggest that under private values, the case against shill-bidding might be weak.

Suggested Citation

  • Subir Bose & Arup Daripa, 2015. "Shills and Snipes," Birkbeck Working Papers in Economics and Finance 1510, Birkbeck, Department of Economics, Mathematics & Statistics.
    • Handle: RePEc:bbk:bbkefp:1510
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    File URL: https://eprints.bbk.ac.uk/id/eprint/15269
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    Cited by:

    1. is not listed on IDEAS
    2. McCannon, Bryan C. & Minuci, Eduardo, 2020. "Shill bidding and trust," Journal of Behavioral and Experimental Finance, Elsevier, vol. 26(C).
    3. Ingebretsen Carlson, Jim & Wu, Tingting, 2022. "Shill bidding and information in eBay auctions: A Laboratory study," Journal of Economic Behavior & Organization, Elsevier, vol. 202(C), pages 341-360.
    4. Barbaro, Salvatore & Bracht, Bernd, 2021. "Shilling, Squeezing, Sniping. A further explanation for late bidding in online second-price auctions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    5. Zakonnik Łukasz & Czerwonka Piotr & Zajdel Radosław, 2022. "Online Auctions End Time and its Impact on Sales Success – Analysis of the Odds Ratio on a Selected Central European Market," Folia Oeconomica Stetinensia, Sciendo, vol. 22(2), pages 246-264, December.

    More about this item

    Keywords

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    JEL classification:

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

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