The Effect of Shill Bidding Upon Prices: Experimental Evidence

30 Pages Posted: 2 Feb 2005

See all articles by Georgia Kosmopoulou

Georgia Kosmopoulou

University of Oklahoma - Department of Economics

Dakshina G. De Silva

Department of Economics, Lancaster University Management School

Date Written: April 2006

Abstract

This paper explores, through a series of experiments, the effect of shill bidding upon revenues and prices in auctions. We study the practice of shill bidding in a common value framework. Our findings are consistent with the prediction that, if bidders are aware of the possibility of seller participation in an auction, profits will be reduced on average. We also study factors that affect bidder and seller participation decisions. Shill bidding can alleviate the problem of the winner's curse by lowering the price and it can, thus, provide benefits to bidders.

Keywords: Auctions, Experiment, Shill Bidding, Entry

JEL Classification: C91, D44

Suggested Citation

Kosmopoulou, Georgia and De Silva, Dakshina G., The Effect of Shill Bidding Upon Prices: Experimental Evidence (April 2006). Available at SSRN: https://ssrn.com/abstract=643143 or http://dx.doi.org/10.2139/ssrn.643143

Georgia Kosmopoulou (Contact Author)

University of Oklahoma - Department of Economics ( email )

633 Elm Avenue
306 Ellison Hall
Norman, OK 73019
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HOME PAGE: http://georgiakosmopoulou.oucreate.com/

Dakshina G. De Silva

Department of Economics, Lancaster University Management School ( email )

Lancaster LA1 4YX
United Kingdom

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