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Early, Late, and Multiple Bidding in Internet Auctions

Author

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  • Radovan Vadovic

    (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

Abstract

In Internet auctions bidders frequently bid in one of three ways: either only early, or late, or they revise their early bids. This paper rationalizes all three bidding patterns within a single equilibrium. We consider a model of a dynamic auction in which bidders can search for outside prices during the auction. We find that in the equilibrium bidders with the low search costs bid only late and always search, while the bidders with high search costs bid early or multiple times and search only if they were previously outbid. An important feature of the equilibrium is that early bidding allows bidders to search in a coordinated manner. This means that everyone searches except the bidder with the highest early bid. We also compare the static and dynamic auction and conclude that dynamic auction is always more efficient but not always more profitable.

Suggested Citation

  • Radovan Vadovic, 2009. "Early, Late, and Multiple Bidding in Internet Auctions," Working Papers 0904, Centro de Investigacion Economica, ITAM.
  • Handle: RePEc:cie:wpaper:0904
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    Cited by:

    1. Juan Carlos Hatchondo & Leonardo Martinez & Horacio Sapriza, 2007. "Quantitative models of sovereign default and the threat of financial exclusion," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 93(Sum), pages 251-286.

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    More about this item

    Keywords

    dynamic auction; Internet auctions; information aquisition;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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