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Shill Bidder’s Behavior in a Second-Price Online Auction

Author

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  • Herzog, Dominic

    () (University of Basel)

Abstract

Shill bidding is a fraudulent in-auction strategy where a seller participates as a bidder in his own auctions. This is the first paper on shill bidding that is based on a data set which includes personal details. Along with bidding histories, I can prove that on the investigated platform 0.3% of all auctions were influence by obvious shill bidders. The majority of the proven shill bidders' behavior in this paper does not fulfill any of the shill bidder types' criteria discussed in the literature. I adopt two algorithms which aim to identify shill bidders based on public information. On average, these approaches assign a higher probability of being a shill bidder to the accounts of bidders who certainly shilled on auctions in my data set. However, a reliable identification of proven shill bidders and honest bidders is only possible to a limited extent.

Suggested Citation

  • Herzog, Dominic, 2014. "Shill Bidder’s Behavior in a Second-Price Online Auction," Working papers 2014/03, Faculty of Business and Economics - University of Basel.
  • Handle: RePEc:bsl:wpaper:2014/03
    as

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    File URL: https://edoc.unibas.ch/61338/1/20180306161240_5a9eafe89f443.pdf
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    References listed on IDEAS

    as
    1. Kosmopoulou, Georgia & De Silva, Dakshina G., 2007. "The effect of shill bidding upon prices: Experimental evidence," International Journal of Industrial Organization, Elsevier, vol. 25(2), pages 291-313, April.
    2. Indranil Chakraborty & Georgia Kosmopoulou, 2004. "Auctions with shill bidding," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(2), pages 271-287, August.
    3. Takahiro Watanabe & Takehiko Yamato, 2008. "A choice of auction format in seller cheating: a signaling game analysis," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 36(1), pages 57-80, July.
    4. Ruqu Wang & Emin Murat Dinlersoz & Parimal Kanti Bag, 2000. "More on phantom bidding," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(3), pages 701-707.
    5. Engelberg, Joseph & Williams, Jared, 2009. "eBay's proxy bidding: A license to shill," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 509-526, October.
    6. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071, August.
    7. Itai Sher, 2012. "Optimal shill bidding in the VCG mechanism," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(2), pages 341-387, June.
    8. Chien-Liang Chen & Yair Tauman, 2006. "Collusion in one-shot second-price auctions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 28(1), pages 145-172, May.
    9. Axel Ockenfels & David Reiley & Abdolkarim Sadrieh, 2006. "Online Auctions," NBER Working Papers 12785, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    auction; shill bidding; bidding behavior;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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