article

The effects of proxy bidding and minimum bid increments within eBay auctions

Authors:

Nicholas R. Jennings,

Jeremy SchiffAuthors Info & Claims

ACM Transactions on the Web (TWEB), Volume 1, Issue 2

Pages 9 - es

https://doi.org/10.1145/1255438.1255441

Published: 01 August 2007 Publication History

Abstract

We present a mathematical model of the eBay auction protocol and perform a detailed analysis of the effects that the eBay proxy bidding system and the minimum bid increment have on the auction properties. We first consider the revenue of the auction, and we show analytically that when two bidders with independent private valuations use the eBay proxy bidding system there exists an optimal value for the minimum bid increment at which the auctioneer's revenue is maximized. We then consider the sequential way in which bids are placed within the auction, and we show analytically that independent of assumptions regarding the bidders' valuation distribution or bidding strategy the number of visible bids placed is related to the logarithm of the number of potential bidders. Thus, in many cases, it is only a minority of the potential bidders that are able to submit bids and are visible in the auction bid history (despite the fact that the other hidden bidders are still effectively competing for the item). Furthermore, we show through simulation that the minimum bid increment also introduces an inefficiency to the auction, whereby a bidder who enters the auction late may find that its valuation is insufficient to allow them to advance the current bid by the minimum bid increment despite them actually having the highest valuation for the item. Finally, we use these results to consider appropriate strategies for bidders within real world eBay auctions. We show that while last-minute bidding (sniping) is an effective strategy against bidders engaging in incremental bidding (and against those with common values), in general, delaying bidding is disadvantageous even if delayed bids are sure to be received before the auction closes. Thus, when several bidders submit last-minute bids, we show that rather than seeking to bid as late as possible, a bidder should try to be the first sniper to bid (i.e., it should “snipe before the snipers”).

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Haruvy ENia MÖzer ÖŞimşek A(2023)The Winner’s Curse in Dynamic Forecasting of Auction Data: Empirical Evidence from eBayManufacturing & Service Operations Management10.1287/msom.2022.116525:3(1155-1175)Online publication date: May-2023
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Gonçalves RRay I(2023)Revenue implications of choosing discrete bid levels in a Japanese–English auctionReview of Economic Design10.1007/s10058-023-00337-728:1(125-150)Online publication date: 29-Jul-2023
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Index Terms

The effects of proxy bidding and minimum bid increments within eBay auctions
1. Applied computing
  1. Law, social and behavioral sciences
    1. Economics

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cover image ACM Transactions on the Web

ACM Transactions on the Web Volume 1, Issue 2

August 2007

105 pages

ISSN:1559-1131

EISSN:1559-114X

DOI:10.1145/1255438

Issue’s Table of Contents

Copyright © 2007 ACM.

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Association for Computing Machinery

New York, NY, United States

Publication History

Published: 01 August 2007

Published in TWEB Volume 1, Issue 2

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https://doi.org/10.1007/978-3-031-82494-4_28
Haruvy ENia MÖzer ÖŞimşek A(2023)The Winner’s Curse in Dynamic Forecasting of Auction Data: Empirical Evidence from eBayManufacturing & Service Operations Management10.1287/msom.2022.116525:3(1155-1175)Online publication date: May-2023
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