Working Paper: NBER ID: w20942
Authors: Matthew Backus; Tom Blake; Dimitriy V. Masterov; Steven Tadelis
Abstract: A common complaint about online auctions for consumer goods is the presence of "snipers," who place bids in the final seconds of sequential ascending auctions with predetermined ending times. The literature conjectures that snipers are best-responding to the existence of "incremental" bidders that bid up to their valuation only as they are outbid. Snipers aim to catch these incremental bidders at a price below their reserve, with no time to respond. As a consequence, these incremental bidders may experience regret when they are outbid at the last moment at a price below their reservation value. We measure the effect of this experience on a new buyer's propensity to participate in future auctions. We show the effect to be causal using a carefully selected subset of auctions from eBay.com and instrumental variables estimation strategy. Bidders respond to sniping quite strongly and are between 4 and 18 percent less likely to return to the platform.
Keywords: online auctions; sniping
JEL Codes: D12; D44; D47; L81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Being sniped (Y60) | Decreased likelihood of returning to the platform (D16) |
| Being sniped (Y60) | Regret among incremental bidders (D44) |
| Regret among incremental bidders (D44) | Decreased likelihood of returning to the platform (D16) |
| Being sniped (Y60) | Likelihood of not returning is 35 percentage points higher (J17) |