BUY-IT-NOW OR SNIPE ON EBAY?

In this paper, we study bidder behavior in an eBay auction with a buy-it-now option. The digital environment that eBay provides gives bidders and sellers a variety of options when they participate. These include using sniping software to submit bids at the last minute and hard close times set a priori by the seller (versus Amazon.com’s soft close which adds 10 minutes to the end of the auction if there is last minute acitivity in an auction). Due to the richness of behaviors which can be observed by the bidders participating in eBay, we realize that there are many equilibria for the bidders in eBay. We propose an equilibrium and prove that it is one of the existing equilibria which survives any kind of deviation by the bidders. We analyze this equilibria for the bidders on eBay and validate our model using the data we collected from the Internet.

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