Good Bids Come to Those Who Wait: The Value of Late Bidding in Online Auctions

28 Pages Posted: 17 Nov 2010 Last revised: 16 Feb 2019

See all articles by Bryan Lim

Bryan Lim

University of Melbourne - Department of Finance; Financial Research Network (FIRN)

Joshua Shemesh

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Date Written: February 15, 2019

Abstract

Abstract This paper proposes an intuitive rationale for late bidding in online venues. The expected surplus from bidding on subsequent auctions for equivalent items creates an option value to losing the current auction. This option is dynamic due to the stochastic arrival of new auctions and early bids on later-closing auctions. We demonstrate that late bidding can be optimal given the decentralized and heterogeneous nature of online auctions, in which the option value is exogenous to an individual bidder’s actions. Late bidding precludes the bidder from being locked into a suboptimal bid as her opportunity set evolves.

Keywords: sniping; last-second bidding; bid timing; Internet auctions; eBay

JEL Classification: C73, D44, D83, L81

Suggested Citation

Lim, Bryan and Shemesh, Joshua, Good Bids Come to Those Who Wait: The Value of Late Bidding in Online Auctions (February 15, 2019). Available at SSRN: https://ssrn.com/abstract=1710384 or http://dx.doi.org/10.2139/ssrn.1710384

Bryan Lim (Contact Author)

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Joshua Shemesh

Monash University - Department of Banking and Finance ( email )

Melbourne
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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