The Role of the Bidding Process in Price Determination: Jump Bidding in Sequential English Auctions
32 Pages Posted: 13 May 2005
Date Written: October 2004
I study the sequence of bidding in an open-outcry English auction to examine how the strategic bidding process affects price determination. I do this by studying the anomalous nature of jump bidding in data I have collected from a series of public auctions of used cars in New Jersey. Jump bidding occur when a new offer is submitted that is above the old offer plus the minimum bid increment permitted. I find that jump biddings are an empirical regularity in all items sold. The jumps are a function of the presale estimate of the item's price but are not affected by the selling order. I suggest a way to use the Jump Biddings to determine whether an open-outcry auction is best interpreted with models that assume private- or common-item valuations, and conclude that these auctions are consistent with the common values interpretation.
JEL Classification: D44
Suggested Citation: Suggested Citation