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    Shills and snipes

    Bose, S. and Daripa, Arup (2015) Shills and snipes. Working Paper. Birkbeck College, University of London, London, UK.

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    Abstract

    Online auctions with a fixed end-time often experience a sharp increase in bidding towards the end despite using a proxy-bidding format. We provide a novel explanation of this phenomenon under private values. We study a correlated private values environment in which the seller bids in her own auction (shill bidding). Bidders selected randomly from some large set arrive randomly in an auction, then decide when to bid (possibly multiple times) over a continuous time interval. A submitted bid arrives over a continuous time interval according to some stochastic distribution. The auction is a continuous-time game where the set of players is not commonly known, a natural setting for online auctions. We show that there is a late-bidding equilibrium in which bids are delayed to the latest instance involving no sacrifice of probability of bid arrival, but shill bids fail to arrive with positive probability, and in this sense optimal late bidding serves to snipe the shill bids. We show conditions under which the equilibrium outcome is unique. Our results suggest that under private values, the case against shill-bidding might be weak.

    Metadata

    Item Type: Monograph (Working Paper)
    Additional Information: ISSN 1745-8587: BWPEF 1510
    Keyword(s) / Subject(s): Online auctions, correlated private values, last-minute bidding, sniping, shill bidding, random bidder arrival, continuous bid time, continuous bid arrival process
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 20 May 2016 09:09
    Last Modified: 20 May 2016 09:09
    URI: http://eprints.bbk.ac.uk/id/eprint/15269

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