Is Last Minute Bidding Bad ?

Last minute bidding on internet auctions is not compatible with standard private value (PV) settings. However, it can be rationalized by adding (at least) another identical auction. In the sequential ebay auction model, it can be proved that the last minute bidding equilibrium, in which bidders only bid at the last minute, is the unique symmetric perfect Bayesian equilibrium in (weakly) undominated strategies. Moreover, bidders would sometimes shade their last minute bids as in a first price auction. Nevertheless, revenue equivalence results show that last minute bidding does not hurt the seller, in contrast to the non-transmission model where last minute bidding is not efficient and lowers sellers’ revenue. Thirdly, a bidder’s maximum willingness to pay for the current stage depends on others’ types. This introduces a “common value” component to the private value environment. Empirically, online event ticket auction data shows some support of the sequential model, while laboratory experiments reject the alternative nontransmission model. ∗Preliminary. Comments welcomed. Please do not quote without permission.

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