Winner's Curse, Reserve Prices and Endogenous Entry: Empirical Insights from Ebay Auctions

Internet auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce. We examine a unique dataset of eBay coin auctions to explore the determinants of bidder and seller behavior. We first document a number of empirical regularities. We then specify and estimate a structural econometric model of bidding on eBay. Using our parameter estimates from this model, we measure the extent of the winner's curse and simulate seller revenue under different reserve prices. Copyright 2003 by the RAND Corporation.

[1]  William Vickrey,et al.  Counterspeculation, Auctions, And Competitive Sealed Tenders , 1961 .

[2]  A. Stroud,et al.  Gaussian quadrature formulas , 1966 .

[3]  Robert B. Wilson.  A Bidding Model of Perfect Competition , 1977 .

[4]  Roger B. Myerson,et al.  Optimal Auction Design , 1981, Math. Oper. Res..

[5]  Paul R. Milgrom,et al.  A theory of auctions and competitive bidding , 1982 .

[6]  Chi-Fu Huang,et al.  Auctions with resale markets : an exploratory model of treasury bill markets , 1989 .

[7]  Ronald M. Harstad.  Alternative Common-Value Auction Procedures: Revenue Comparisons with Free Entry , 1990, Journal of Political Economy.

[8]  Harry J. Paarsch.  Deciding between the common and private value paradigms in empirical models of auctions , 1992 .

[9]  Harry J. Paarsch,et al.  Piecewise Pseudo-maximum Likelihood Estimation in Empirical Models of Auctions , 1993 .

[10]  R. McAfee.  Mechanism Design by Competing Sellers , 1993 .

[11]  Dan Levin,et al.  Equilibrium in Auctions with Entry , 1994 .

[12]  Quang Vuong,et al.  First-Price Sealed-Bid Auctions with Secret Reservation Prices , 1994 .

[13]  John Geweke,et al.  Posterior simulators in econometrics , 1995 .

[14]  Daniel R. Vincent.  Bidding Off the Wall: Why Reserve Prices May Be Kept Secret , 1995 .

[15]  J. Laffont,et al.  ECONOMETRICS OF FIRST-PRICE AUCTIONS , 1995 .

[16]  Harry J. Paarsch,et al.  A Survey of Recent Empirical Work Concerning Auctions , 1995 .

[17]  David M. Kreps,et al.  Advances In Economics and Econometrics: Theory And Applications: Seventh World Congress , 1997 .

[18]  Harry J. Paarsch.  Deriving an estimate of the optimal reserve price: An application to British Columbian timber sales , 1997 .

[19]  Michael Peters,et al.  Competition among Sellers Who Offer Auctions Instead of Prices , 1997 .

[20]  Harry J. Paarsch.  Deriving an estimate of the optimal reserve price: An application to British Columbian timber sales , 1997 .

[21]  K. Judd.  Numerical methods in economics , 1998 .

[22]  Robert B. Wilson,et al.  Sequential equilibria of asymmetric ascending auctions: The case of log-normal distributions , 1998 .

[23]  M. Shum.  THE ECONOMETRICS OF ENGLISH AUCTIONS , 1998 .

[24]  S. Sareen,et al.  Posterior Odds Comparison of a Symmetric Low-Price, Sealed-Bid Auction within the Common-Value and the Independent-Private-Values Paradigms , 1999 .

[25]  Philip A. Haile.  Partial Pooling at the Reserve Price in Auctions with Resale Opportunities , 2000, Games Econ. Behav..

[26]  David H. Reiley,et al.  Public versus Secret Reserve Prices in eBay Auctions: Results from a Pokémon Field Experiment , 2007 .

[27]  Susan Athey,et al.  Identification of Standard Auction Models , 2000 .

[28]  Abraham Seidmann,et al.  Implications of the bidders' arrival process on the design of online auctions , 2000, Proceedings of the 33rd Annual Hawaii International Conference on System Sciences.

[29]  R. Porter,et al.  Empirical Implications of Equilibrium Bidding in First-Price, Symmetric, Common Value Auctions , 1999 .

[30]  David H. Reiley,et al.  Pennies from Ebay: The Determinants of Price in Online Auctions , 2000 .

[31]  David H. Reiley.  Auctions on the Internet: What's Being Auctioned, and How? , 2000 .

[32]  A. Roth,et al.  Last Minute Bidding and the Rules for Ending Second-Price Auctions: Theory and Evidence from a Natural Experiment on the Internet , 2000 .

[33]  Philip A. Haile,et al.  Inference with an Incomplete Model of English Auctions , 2000, Journal of Political Economy.

[34]  H. Hong.  Increasing Competition and the Winner's Curse: Evidence from Procurement , 2002 .

[35]  J. Wooders,et al.  Reputation in Auctions: Theory, and Evidence from Ebay , 2006 .

[36]  M. Melnik,et al.  Does a Seller's Ecommerce Reputation Matter? Evidence from Ebay Auctions , 2003 .

[37]  Paul Resnick,et al.  Trust among strangers in internet transactions: Empirical analysis of eBay' s reputation system , 2002, The Economics of the Internet and E-commerce.

[38]  Daniel R. Vincent,et al.  How to Set Minimum Acceptable Bids, with an Application to Real Estate Auctions , 2002 .

[39]  Michael Peters,et al.  Internet Auctions with Many Traders , 2002 .

[40]  Paul Resnick,et al.  The value of reputation on eBay: A controlled experiment , 2002 .