Defensive Sniping and Efficiency in Simultaneous Hard-Close Proxy Auctions
Posted: 20 May 2008 Last revised: 24 Feb 2015
Date Written: October 1, 2009
A well-known myopic bidding strategy fails to support an equilibrium of simultaneous ascending proxy auctions for heterogeneous items when a hard-close rule is in place. This is because, in common with the single-auction case, last minute bidding (sniping) is a best response to naïve behaviour. However, a modification to the myopic strategy in which all bidders submit an additional bid in the closing stages of the auction — a practice I call 'defensive sniping' — is shown to yield an efficient, belief-free equilibrium of such environments. This equilibrium is essentially unique within the class of belief-free, efficient equilibria.
Keywords: auctions, sniping, ebay, amazon, hard close, bid timing
JEL Classification: D44, C73, C90
Suggested Citation: Suggested Citation