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

14 Pages Posted: 17 May 2020

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)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2019

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 decentralised 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.

Suggested Citation

Lim, Bryan and Shemesh, Joshua, Good Bids Come to Those Who Wait: The Value of Late Bidding in Online Auctions (June 2019). Economic Record, Vol. 95, Issue 309, pp. 248-261, 2019, Available at SSRN: https://ssrn.com/abstract=3597568 or http://dx.doi.org/10.1111/1475-4932.12456

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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