Effects of Minimum Bid Increments in Internet Auctions: Evidence from a Field Experiment

26 Pages Posted: 25 Oct 2017

See all articles by Janne Tukiainen

Janne Tukiainen

VATT Institute for Economic Research; University of Turku - Turku School of Business - Department of Economics

Date Written: September 2017

Abstract

I study the role of minimum bid increments (MBI) in internet auctions using natural field experiment data from a Finnish online auction site Huuto.net. Internet auctions are typically viewed as second‐price, implying truthful bidding. However, due to the presence of the MBI, equilibrium bidding behavior involves bid shading. I sell otherwise identical gift cards while varying the MBI and test between truthful bidding and bid shading. Truthful bidding is rejected. Consistently with equilibrium behavior, bid shading increases as the MBI increases. This implies that real‐world bidders are capable of reacting rationally even to seemingly small variations in their strategic environment.

Suggested Citation

Tukiainen, Janne, Effects of Minimum Bid Increments in Internet Auctions: Evidence from a Field Experiment (September 2017). The Journal of Industrial Economics, Vol. 65, Issue 3, pp. 597-622, 2017. Available at SSRN: https://ssrn.com/abstract=3058447 or http://dx.doi.org/10.1111/joie.12135

Janne Tukiainen (Contact Author)

VATT Institute for Economic Research ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00101
Finland

University of Turku - Turku School of Business - Department of Economics ( email )

Rehtorinpellonkatu 3
Turku, 20014
Finland

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