eBay's proxy bidding: A license to shill

Joseph Engelberg and Jared Williams

Journal of Economic Behavior & Organization, 2009, vol. 72, issue 1, 509-526

Abstract: We introduce a bidding strategy which allows the seller to extract the full surplus of the high bidder in eBay auctions. We call this a "Discover-and-Stop" bidding strategy and estimate that 1.39 percent of all bids in eBay auctions are placed by sellers (or accomplices) who execute this strategy. We argue that this kind of shill bidding is unnecessarily effective due to eBay's proxy system and the predictability of other bidders' bids. We also model eBay auctions with shill bidding and find that, in equilibrium, eBay's profits are higher with shilling than without it. Finally, to determine whether bidders have an incentive to bid on their own items, we mimic the bidding behavior of shill bidders in actual eBay auctions and find some evidence of the strategy's success.

Keywords: eBay; eBay; auctions; Shill; bidding; Shilling; Incremental; bidding (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:72:y:2009:i:1:p:509-526

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