A new end-of-auction model for curbing sniping

AbstractThe online auction market has been growing at a spectacular rate. Most auctions are open-bid auctions where all the participants know the current highest bid. This knowledge has led to a phenomenon known as sniping, whereby some bidders may wait until the last possible moment before bidding, thereby depriving other bidders of the opportunity to respond and also preventing sellers from obtaining the highest price for an item. This is especially true in the case of the commonly used second-price, fixed-deadline auction. We consider a procedure involving a randomly determined stopping time and show that this approach eliminates the potential benefits to a sniper. The scheme enables all bidders to compete more fairly and promotes an early bidding strategy, which is likely to increase the price received by the seller while providing adequate bidding opportunities for would-be buyers.