Impact of closing time and late bidding on Consumer Auctions – A bidders per perspective
In this paper we discuss the impact of the rule for deciding the closing time in an auction on a bidders strategy. In particular we look at how different closing time rules encourage late bidding or ‘snipping’ as it known in auction circles. We discuss the plausible reasons for occurrence of late bidding and the conditions that lead to this strategy becoming the best response. We also present empirical evidence substantiating some of these theories.
Over the past decade there has been rapid growth in the volume of trade in internet auctions. All most all of these auctions are modeled as English auctions. However interplay of a number of factors introduces complexities in determining a strategy for a bidder. The problem of trust or information asymmetry presents an interesting challenge in online auctions. Online auctions take place between strangers with very little chance of physical inspection of goods. This inhibits bidders and in cases compels them to decide their private value of the goods based on bidding patterns of other consumers. To mitigate the threat of frauds all most all auction sites have developed a reputation system. These systems and their ratings of sellers have a substantial impact on the bidding patterns of consumers. Further trying to devise a strategy for the bidders is complicated by the presence of bidders of varying competence. Online auctions due to their wide reach are participated in by both amateur and expert bidders. It is not uncommon for amateur bidders to bid irrationally without understanding the rules of the auctions. Further online auctions are infested with parallel or simultaneous auctions with complimentary or substitutable goods on offer. This can cause further deviations in the behavior of a bidder than can be predicted theoretically.
In this paper, we look at how these factors and more, combined...