Gradual Bidding in Ebay-Like Auctions

59 Pages Posted: 24 May 2012 Last revised: 11 Jun 2015

See all articles by Attila Ambrus

Attila Ambrus

Duke University - Department of Economics

Yuhta Ishii

Pennsylvania State University

James Burns

Harvard University metaLAB

Date Written: September 5, 2013

Abstract

This paper shows that in online auctions like eBay, if bidders can only place bids at random times, then many di fferent 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. Bidders in such equilibria implicitly collude to keep the increase of the winning price slow over the duration of the auction. In a common value environment, we characterize a class of equilibria that include the one in which bidding at any price is maximally delayed, and all bids minimally increment the price. The seller's revenue can be a small fraction of what could be obtained at a sealed-bid second-price auction, and in the worst equilibrium it is decreasing in the value of the object. With many bidders, we show that this equilibrium has the feature that bidders are passive until near the end of the auction, and then they start bidding incrementally.

Suggested Citation

Ambrus, Attila and Ishii, Yuhta and Burns, James, Gradual Bidding in Ebay-Like Auctions (September 5, 2013). Economic Research Initiatives at Duke (ERID) Working Paper No. 129. Available at SSRN: https://ssrn.com/abstract=2065332

Attila Ambrus (Contact Author)

Duke University - Department of Economics ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Yuhta Ishii

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

James Burns

Harvard University metaLAB ( email )

Harvard Law School
23 Everett, 2nd Floor
Cambridge, MA 02138
United States

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