Revenue Non-Equivalence between Auctions With Soft and Hard Closing Mechanisms: New Evidence from Yahoo!

19 Pages Posted: 3 Jun 2007

See all articles by Brent Glover

Brent Glover

Carnegie Mellon University - David A. Tepper School of Business

Yaron Raviv

Claremont McKenna College - Robert Day School of Economics and Finance

Date Written: May 31, 2007

Abstract

Many online bidders place bids seconds before the auction's close, a practice known as "sniping." Most theoretical explanations argue that sniping lowers the expected selling price. We examine the revenue effect of sniping by analyzing the revenue differences between auctions with a hard-close ending rule versus those with a soft-close ending rule. Since in a soft-close ending rule there is no rational motivation for sniping, the difference in revenues can be attributed to the effect of sniping. We found selling items using the soft-close mechanism increases the selling price by almost $40 (or 19%) over the hard-close format. We claim that lack of experience could help explain why not all sellers use the soft-close ending rule. However, we cannot explain why auction sites such as eBay only allow sellers to employ a hard-close format.

Keywords: Auction, Sniping, Ending Rules

JEL Classification: D44

Suggested Citation

Glover, Brent and Raviv, Yaron, Revenue Non-Equivalence between Auctions With Soft and Hard Closing Mechanisms: New Evidence from Yahoo! (May 31, 2007). Available at SSRN: https://ssrn.com/abstract=990166 or http://dx.doi.org/10.2139/ssrn.990166

Brent Glover (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Yaron Raviv

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States
909-607-7305 (Phone)

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