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Behavior in second-price auctions by highly experienced eBay buyers and sellers

Published online by Cambridge University Press:  14 March 2025

Rodney J. Garratt ,
Mark Walker  and
John Wooders
Rodney J. Garratt*
Affiliation:
Department of Economics, University of California, Santa Barbara, CA 93106, USA
Mark Walker*
Affiliation:
Department of Economics, University of Arizona, Tucson, AZ 85721, USA
John Wooders*
Affiliation:
Department of Economics, University of Arizona, Tucson, AZ 85721, USA
*
garratt@econ.ucsb.edu
mwalker@arizona.edu
jwooders@eller.arizona.edu
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Abstract

We report on sealed-bid second-price auctions that we conducted on the Internet using subjects with substantial prior experience: they were highly experienced participants in eBay auctions. Unlike the novice bidders in previous (laboratory) experiments, the experienced bidders exhibited no greater tendency to overbid than to underbid. However, even subjects with substantial prior experience tended not to bid their values, suggesting that the non-optimal bidding of novice subjects is robust to substantial experience in non-experimental auctions. We found that auction revenue was not significantly different from the expected revenue the auction would generate if bidders bid their values. Auction efficiency, as measured by the percentage of surplus captured, was substantially lower in our SPAs than in previous laboratory experiments.

Keywords

ExperienceeBaySecond-priceSealed bidAuction

JEL classification

C12: Hypothesis Testing: General D44: Auctions C93: Field Experiments D82: Asymmetric and Private Information • Mechanism Design
Type
Original Paper
Information
Experimental Economics , Volume 15 , Issue 1 , March 2012 , pp. 44 - 57
Copyright
Copyright © 2011 Economic Science Association

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Footnotes

This paper is based on Garratt et al. (2004). We thank Jordi Brandts, Greg Crawford, Ron Harstad, John Kagel, Dan Levin and two anonymous referees for helpful comments. We are grateful to John Kagel for providing us with data from experiments reported in Kagel and Levin (1993). This research was partially supported by Grant No. SBR-0099353 from the National Science Foundation.

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