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Early, Late, and Multiple Bidding in Internet Auctions

  • Radovan Vadovic

    ()

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

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.

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Paper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 0904.

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Length: 42 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:cie:wpaper:0904
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