Is Sniping A Problem For Online Auction Markets?

Matthew Backus, Thomas Blake, Dimitriy V. Masterov and Steven Tadelis

No 20942, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A common complaint about online auctions for consumer goods is the presence of "snipers," who place bids in the final seconds of sequential ascending auctions with predetermined ending times. The literature conjectures that snipers are best-responding to the existence of "incremental" bidders that bid up to their valuation only as they are outbid. Snipers aim to catch these incremental bidders at a price below their reserve, with no time to respond. As a consequence, these incremental bidders may experience regret when they are outbid at the last moment at a price below their reservation value. We measure the effect of this experience on a new buyer's propensity to participate in future auctions. We show the effect to be causal using a carefully selected subset of auctions from eBay.com and instrumental variables estimation strategy. Bidders respond to sniping quite strongly and are between 4 and 18 percent less likely to return to the platform.

JEL-codes: D12 D44 D47 L81 (search for similar items in EconPapers)
Date: 2015-02
New Economics Papers: this item is included in nep-com and nep-mkt
Note: IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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