The Role of the Bidding Process in Price Determination: Jump Bidding in Sequential English Auctions

Economic Inquiry, Vol. 46, Issue 3, pp. 325-341, July 2008

17 Pages Posted: 8 Sep 2008

See all articles by Yaron Raviv

Yaron Raviv

Claremont McKenna College - Robert Day School of Economics and Finance

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Abstract

This paper uses data collected from a series of public auctions of used cars in New Jersey to examine how strategic bidding affects price determination in open-outcry English auctions. Jumps in the bidding, which occur when a new offer exceeds the old offer by more than the minimum bid increment, are highly pervasive and consistently related to the items presale estimated price. The size of the jumps is not affected by the selling order, however. This jump bidding pattern suggests that open-outcry auctions are more appropriately interpreted with models that assume common-item valuations rather than models assuming private valuations.

JEL Classification: JEL D44

Suggested Citation

Raviv, Yaron, The Role of the Bidding Process in Price Determination: Jump Bidding in Sequential English Auctions. Economic Inquiry, Vol. 46, Issue 3, pp. 325-341, July 2008, Available at SSRN: https://ssrn.com/abstract=1263075 or http://dx.doi.org/10.1111/j.1465-7295.2007.00088.x

Yaron Raviv (Contact Author)

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