To Bid or Not to Bid Aggressively? An Empirical Study

Philipp Herrmann (), Dennis Kundisch () and Mohammad Rahman ()
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Philipp Herrmann: University of Paderborn
Dennis Kundisch: University of Paderborn
Mohammad Rahman: Purdue University

No 8, Working Papers Dissertations from Paderborn University, Faculty of Business Administration and Economics

Abstract: We analyze aggressive bidding, used as a strategy to intimidate auction competitors, with regards to its impact on the likelihood of winning an online auction. To answer our research question, we use a dataset containing actual market transaction records for approximately 7,000 online pay-per-bid auctions. Our research design allows us to isolate aggressive bids that are used in an attempt to deter other auction participants by signaling a high valuation. Thus, we can analyze the effects of this strategy on the probability of winning an auction. We find a significant negative effect of aggressive bidding on one’s likelihood of winning an auction. Our results suggest that aggressive bidding is not successful in deterring auction competitors. When comparing the effectiveness of different strategies, we find sniping to be up to seven times more effective than aggressive bidding.

Keywords: Economics of IS; Internet Markets; Auctions; Bidding Strategies; Aggressive Bidding; Sniping; Information Revelation (search for similar items in EconPapers)
Pages: 35
Date: 2013-02
New Economics Papers: this item is included in nep-ict
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