Selling a Dollar for More Than a Dollar? Evidence from Online Penny Auctions

Zhongmin Wang () and Minbo Xu
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Zhongmin Wang: Resources for the Future

RFF Working Paper Series from Resources for the Future

Abstract: Online penny auctions, emerged recently, are seen as an adaptation of the famous dollar auction and as ?the evil stepchild of game theory and behavioral economics.?We use the complete bid and bidder history at a website to study if penny auctions can sustain excessive pro?fits over time. The overwhelming majority of new bidders lose money, but they quit quickly. A very small percentage of bidders are experienced and strategically sophisticated, but they earn substantial profi?ts. Our evidence thus suggests that penny auctions cannot sustain excessive pro?fits without attracting a revolving door of new customers who will lose money.

Keywords: behavioral game theory; behavioral industrial organization; auction; learning; strategic sophistication (search for similar items in EconPapers)
JEL-codes: D03 D44 L81 (search for similar items in EconPapers)
Date: 2013-05-30
New Economics Papers: this item is included in nep-cbe and nep-exp
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Citations: View citations in EconPapers (1)

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