An experimental test of alternative models of bidding in ascending auctions

Abstract

D44, C90, auction theory, ascending auctions, jump bidding,

Does It Pay Off to Bid Aggressively? An Empirical Study

“…Within their experimental design, the authors successfully modify the incentives to use jump bids linked to impatience. Consistent with Isaac and Schnier [22] and Isaac et al [21] they find that jump bidding due to impatience increases auction revenue. Bapna et al [8] analyze jump bidding using a simulation framework for Yankee-type auctions.…”

“…The authors interpret this finding as indirect evidence for the signaling value of jump bids. On the other hand, Isaac and Schnier [22] as well as Isaac et al [21] provide some empirical and experimental evidence that jump bidding is driven by the impatience of auction participants and, thus, has no detrimental, or, indeed, may even have a positive effect on the end price of an auction. These results are reinforced by Kwasnica and Katok [24] who find that higher bidder impatience results in greater jump bids.…”

“…A broad range of studies have highlighted the existence of such bidding behavior. In particular, earlier studies have analyzed jump bidding in the context of different types of ascending price auctions (e.g., [3], [4], [8], [10], [12], [14], [18], [21], [20], [24], [27], [28]). Theoretical studies have identified signaling and impatience as major explanations for jump bidding.…”

“…In other words, we aim to resolve empirically the incongruity of the conclusions drawn from various theoretical and simulation studies. In particular, while prior theoretical studies (e.g., [3], [12]), and anecdotes provided by [3] suggest an inherently positive payoff from aggressive bidding, studies in support of bidders' impatience as a cause of aggressive bidding imply that the payoff is insignificant (e.g., [21], [20]). …”

A theory of jump bidding in ascending auctions

“…Because this claim has been made specifically in regard to the design of field ascending auctions, it is important to inquire as to its validity. The design and analysis of the model in this paper will provide a theoretical investigation in regard to the internal consistency of the claim while a follow-up paper, Isaac et al (2005), will test the issue empirically.…”