An Experimental Analysis of Ending Rules in Internet Auctions

41 Pages Posted: 21 Aug 2003  

Dan Ariely

Duke University - Fuqua School of Business

Axel Ockenfels

University of Cologne - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Alvin E. Roth

HBS Negotiations, Organizations and Markets Unit; National Bureau of Economic Research (NBER)

Date Written: July 2003

Abstract

A great deal of late bidding has been observed on internet auctions such as eBay, which employ a second price auction with a fixed deadline. Much less late bidding has been observed on internet auctions such as those run by Amazon, which employ similar auction rules, but use an ending rule that automatically extends the auction if necessary after the scheduled close until ten minutes have passed without a bid. This paper reports an experiment that allows us to examine the effect of the different ending rules under controlled conditions, without the other differences between internet auction houses that prevent unambiguous interpretation of the field data. We find that the difference in auction ending rules is sufficient by itself to produce the differences in late bidding observed in the field data. The experimental data also allow us to examine how individuals bid in relation to their private values, and how this behavior is shaped by the different opportunities for learning provided in the auction conditions.

JEL Classification: D44, C9

Suggested Citation

Ariely, Dan and Ockenfels, Axel and Roth, Alvin E., An Experimental Analysis of Ending Rules in Internet Auctions (July 2003). CESifo Working Paper Series No. 987; Harvard NOM Working Paper No. 03-42; MIT Sloan Working Paper No. 4419-03. Available at SSRN: https://ssrn.com/abstract=429963 or http://dx.doi.org/10.2139/ssrn.429963

Dan Ariely

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
(919) 381-4366 (Phone)

Axel Ockenfels (Contact Author)

University of Cologne - Department of Economics ( email )

Albertus Magnus Platz
Cologne 50923
Germany

HOME PAGE: http://ockenfels.uni-koeln.de/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Alvin E. Roth

HBS Negotiations, Organizations and Markets Unit ( email )

Soldiers Field
Boston, MA 02163
United States
617-495-5447 (Phone)
617-496-7379 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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