Sniping and Squatting in Auction Markets

We conducted a field experiment to test the benefit from late bidding (sniping) in online auction markets. We compared sniping to early bidding (squatting) in auctions for newly-released DVDs on eBay. Sniping led to a statistically significant increase in our average surplus. However, this improveme...

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Bibliographic Details
Published in:American economic journal. Microeconomics 2009-08, Vol.1 (2), p.68-94
Main Authors: Ely, Jeffrey C., Hossain, Tanjim
Format: Article
Language:English
Subjects:
Auction markets
Auctions
Bidders
Bidding
Bids
Competition
Economic competition
Experiments
Field experiments
Laboratories
Macroeconomics
Meetings
Microeconomics
Opening prices
Rationality
Shipping
Shipping costs
Studies
Surplus
Valuation
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Summary:We conducted a field experiment to test the benefit from late bidding (sniping) in online auction markets. We compared sniping to early bidding (squatting) in auctions for newly-released DVDs on eBay. Sniping led to a statistically significant increase in our average surplus. However, this improvement was small. The two bidding strategies resulted in a variety of other qualitative differences in the outcomes of auctions. We show that a model of multiple concurrent auctions, in which our opponents are naïve or incremental bidders as identified in the lab, explain the results well. Our findings illustrate how the overall impact of naïveté, and the benefit from sniping observed in the lab, may be substantially attenuated in real-world market settings.
ISSN:1945-7669
1945-7685
DOI:10.1257/mic.1.2.68