The Effect of Shill Bidding Upon Prices: Experimental Evidence
30 Pages Posted: 2 Feb 2005
Date Written: April 2006
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: Suggested Citation