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Multiple and last-minute bidding in competing Internet auctions

November 2009

Working Paper

The present paper proposes a theoretical model of the optimal bidding behavior in simultaneous competing Internet auctions, which are very popular on eBay. We argue that in order to avoid the risk of paying too high a price, bidders wish to learn how valuable the good appears to the other bidders and basing on that information to allocate between the auctions.

To do so, they prefer to first bid less aggressively to test the market and next to bid more aggressively in the auction chosen according to what they learn from the market. We also show that in an equilibrium, bidders may bid in the last-minute, even-thought last-minute bidding causes inefficiency.

Finally, we indicate that the competition between the auctions introduces certain asymmetry in optimal bidding strategies.  

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