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Gradual Bidding in eBay-Like Auctions

Author

Listed:
  • Attila Ambrus
  • James Burns
  • Yuhta Ishii

Abstract

This paper shows that in online auctions like eBay, if bidders are not continuously participating in the auction but can only place bids at random times, then many different equilibria arise besides truthful bidding, despite the option to leave proxy bids. These equilibria can involve gradual bidding, periods of inactivity, and waiting to start bidding towards the end of the auction--bidding behaviors common on eBay. In a common value environment, we characterize a class of equilibria that include the best and worst equilibria for the seller. The revenue of the seller in the latter can be a small fraction of what could be obtained at a sealed-bid second-price auction. For large number of bidders, we show that the worst equilibrium has the feature that bidders are passive until near the end of the auction, and then they start bidding incrementally.

Suggested Citation

  • Attila Ambrus & James Burns & Yuhta Ishii, 2012. "Gradual Bidding in eBay-Like Auctions," Working Papers 12-12, Duke University, Department of Economics.
    • Handle: RePEc:duk:dukeec:12-12
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    Cited by:

    1. Dominic Coey & Bradley J. Larsen & Brennan C. Platt, 2020. "Discounts and Deadlines in Consumer Search," American Economic Review, American Economic Association, vol. 110(12), pages 3748-3785, December.
    2. Sofia Moroni, 2019. "Existence of trembling hand perfect and sequential equilibrium in games with stochastic timing of moves," Working Paper 6757, Department of Economics, University of Pittsburgh.
    3. Sofia Moroni, 2016. "Sniping in Proxy Auctions with Deadlines," Working Paper 5875, Department of Economics, University of Pittsburgh.
    4. Sofia Moroni, 2015. "Existence of trembling hand equilibrium in revision games with imperfect information," Working Paper 5874, Department of Economics, University of Pittsburgh.
    5. Peitz, Martin & Waldfogel, Joel, 2012. "The Oxford Handbook of the Digital Economy," OUP Catalogue, Oxford University Press, number 9780195397840.
    6. Yuichiro Kamada & Michihiro Kandori, 2020. "Revision Games," Econometrica, Econometric Society, vol. 88(4), pages 1599-1630, July.
    7. Hugo Hopenhayn & Maryam Saeedi, 2016. "Bidding Dynamics in Auctions," NBER Working Papers 22716, National Bureau of Economic Research, Inc.
    8. Xiaogang Che & Tilman Klumpp, 2016. "Entry Deterrence in Dynamic Second-Price Auctions," American Economic Journal: Microeconomics, American Economic Association, vol. 8(2), pages 168-201, May.
    9. Sofia Moroni, 2020. "Existence of Trembling hand perfect and sequential equilibrium in Stochastic Games," Working Paper 6837, Department of Economics, University of Pittsburgh.

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