Last Minute Bidding and the Rules for Ending Second-Price Auctions: Theory and Evidence from a Natural Experiment on the Internet

Alvin E. Roth, Axel Ockenfels

NBER Working Paper No. 7729
Issued in June 2000
NBER Program(s):Industrial Organization

There is a great deal of late bidding on internet second price auctions. We show that this need not result from either common value properties of the objects being sold, or irrational behavior: late bidding can occur at equilibrium even in private value auctions. The reason is that very late bids have a positive probability of not being successfully submitted, and this opens a way for bidders to implicitly collude, and avoid bidding wars, in auctions such as those run by eBay, which have a fixed end time. A natural experiment is available because the auctions on Amazon, while operating under otherwise similar rules, do not have a fixed end time, but continue if necessary past the scheduled end time until ten minutes have passed without a bid. The strategic differences in the auction rules are reflected in the auction data by significantly more late bidding on eBay than on Amazon. Futhermore, more experienced bidders on eBay submit late bids more often than do less experienced bidders, while the effect of experience on Amazon goes in the opposite direction. On eBay, there is also more late bidding for antiques than for computers. We also find scale independence in the distribution over time of bidders' last bids, of a form strikingly similar to the deadline effect' noted in bargaining: last bids are distributed according to a power law. The evidence suggests that multiple causes contribute to late bidding, with strategic issues related to the rules about ending the auction playing an important role.

download in pdf format
   (412 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w7729

Published: Roth, Alvin E. and Axel Ockenfels. "Last-Minute Bidding And The Rules For Ending Second-Price Auctions: Evidence From eBay And Amazon Auctions On The Internet," American Economic Review, 2002, v92(4,Sep), 1093-1103.

Users who downloaded this paper also downloaded* these:
Ockenfels, Reiley, and Sadrieh w12785 Online Auctions
Bajari and Horta├žsu w10076 Economic Insights from Internet Auctions: A Survey
Edelman, Ostrovsky, and Schwarz w11765 Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords
Katkar and Reiley w8183 Public Versus Secret Reserve Prices in eBay Auctions: Results from a Pokemon Field Experiment
Roth and Peranson w6963 The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us