Bidding Dynamics in Auctions

55 Pages Posted: 10 Oct 2016 Last revised: 26 Jan 2023

See all articles by Hugo A. Hopenhayn

Hugo A. Hopenhayn

University of California, Los Angeles (UCLA) - Department of Economics

Maryam Saeedi

Carnegie Mellon University - David A. Tepper School of Business

Date Written: October 2016

Abstract

This paper studies bidding dynamics where values and bidding opportunities follow an unrestricted joint Markov process, independent across agents. Bids cannot be retracted, as is frequently the case in auctions. Our main methodological contribution is that we construct a mapping from this general stochastic process into a distribution of values that is independent of the type of auction considered. The equilibria of a static auction with this distribution of values is used to characterize the equilibria of the dynamic auction, making this general class very tractable. As a result of the option of future rebidding, early bids are shaded and under mild conditions increase toward the end of the auction. Our results are consistent with repeated bidding and skewness of the time distribution of winning bids, two puzzling observations in dynamic auctions. As an application, we estimate the model by matching moments from eBay auctions.

Suggested Citation

Hopenhayn, Hugo A. and Saeedi, Maryam, Bidding Dynamics in Auctions (October 2016). NBER Working Paper No. w22716, Available at SSRN: https://ssrn.com/abstract=2850250

Hugo A. Hopenhayn (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States

Maryam Saeedi

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

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