The Dominant Strategy for eBay Auction Bidding
https://www.stat.berkeley.edu/~aldous/Research/Ugrad/selene_xu.pdf
The article above found that there’s consistently around 5% price premium of ebay auction ending prices in comparison to market prices. And the reason for such premium is due to the fact the following: 1. In reality, not all bidders have perfect market information on price 2. Basic structure of ebay bidding platform allow for multiple bids hence increases the chance of bidding more than one’s true value 3. The utility from winning the auction can be contributed to the over-bidding.
http://www.cs.jhu.edu/~scheideler/club/spring_02/ebay-revisedOriginal.pdf
This paper by Harvard University professor Alvin Roth and University of Magdeburg on late bidding on eBay auction items explains that rather than a coincidence, late bidding is a strategy that buyers employ to win auctions. These buyers include both experienced and inexperienced according to their feedback score. However, more experienced bidders are more likely to bid later than less experienced/feedback score bidders. They also found that there’s apparently more late bidding in Antique items than Computer related items. And the Antique bidders admitted in a survey that they strategically bid late to avoid sharing of value information. While some bidders said that they are influenced the other’s bidding activities.
The evidence reveals a dominant bidding strategy on ebay: bidding your true value late for the reasons below:
- Some people will decide to bid based on number of bids – information based decision making rather than direct benefit based. Hence the less number of bids will attract less such buyers to bid.
- For categories such as Antique which requires expertise and experience, late bidding will reveal less information about one’s true value.
- A fixed time auction in which all bids happen late means some late bids will be lost.