The effect of jump bids on final prices in auctions

Last registered on July 26, 2019

Pre-Trial

Trial Information

General Information

Title
The effect of jump bids on final prices in auctions
RCT ID
AEARCTR-0004481
Initial registration date
July 25, 2019

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
July 26, 2019, 4:35 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Region

Primary Investigator

Affiliation
Utrecht University

Other Primary Investigator(s)

PI Affiliation
Utrecht University
PI Affiliation
Utrecht University

Additional Trial Information

Status
On going
Start date
2019-04-05
End date
2019-09-06
Secondary IDs
Abstract
A frequently observed behavior in online auctions is jump bidding: a strategy in which bidders place higher bids than what is necessary to become the current highest bidder. While multiple theories explaining jump bidding in ascending auctions exist (e.g. Avery, 1998; Isaac, Salmon & Zillante, 2007), there is hardly any consensus on the direction and size of the effect of jump bidding on the seller’s revenue. We therefore design an experiment to evaluate the effect of jump bidding behavior on the final price of an auctioned item, under controlled conditions. In randomized controlled trials, we either (i) do not bid (control), (ii) make an early jump bid far below the estimated value of the item, or (iii) make incremental bids up to the value of the jump bid made in condition (ii). We test whether the bidding behavior by others and the final price differ between experimental conditions. Understanding the effects of jump bidding behavior may help design more efficient online auctions and prevent market failure.

External Link(s)

Registration Citation

Citation
van de Rijt, Arnout, Joyce Delnoij and Sarah Rezaei. 2019. "The effect of jump bids on final prices in auctions." AEA RCT Registry. July 26. https://doi.org/10.1257/rct.4481
Former Citation
van de Rijt, Arnout, Joyce Delnoij and Sarah Rezaei. 2019. "The effect of jump bids on final prices in auctions." AEA RCT Registry. July 26. https://www.socialscienceregistry.org/trials/4481/history/50729
Experimental Details

Interventions

Intervention(s)
We are going to collect data from an online auction website. We then randomly assign each auction to one of our three experimental treatments. As soon as the auctions begin, we place the first bid on the items based on the rules of the treatments they have been randomly assigned to. In treatment 1, our control condition, we do not intervene in the bidding. In treatment 2, we place a jump bid. In treatment 3, we place an automatic bid. After all auctions have ended, we request the platform for the bidding data.
Intervention Start Date
2019-04-05
Intervention End Date
2019-09-06

Primary Outcomes

Primary Outcomes (end points)
Final price of an item, Seller revenue.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
We are going to collect data from an online auction website. We then randomly assign each auction to one of our three experimental treatments. As soon as the auctions begin, we place the first bid on the items based on the rules of the treatments they have been randomly assigned to. In treatment 1, our control condition, we do not intervene in the bidding. In treatment 2, we place a jump bid. In treatment 3, we place an automatic bid. After all auctions have ended, we request the platform for the bidding data.
Experimental Design Details
We are going to collect data from an online auction website, Catawiki.com. The website is specialized in buying and selling novelty items and collectibles such as stamps, arts, antique cars, gemstones, etc. We specifically collect data from mixed diamond auctions, as these items are frequently offered on Catawiki.com and can be categorized as common value items. Moreover, we focus on auctions that do not list a reservation or minimum price for which the item will be sold (so that our low bids are credible). All auctions in our sample run approximately one week starting from Friday at noon. For each auction, we record the item’s specifications, the minimum and maximum value of the item estimated by Catawiki’s experts, and all bids along with each bidder’s website identifier from the beginning to the end of the auction. Prior to the start of the auctions, we create a sample by selecting all relevant auctions, e.g. mixed diamond auctions without a minimum price, from the list of “auctions opening on a specific date”. Within each trio of matched auctions, we then randomly assign each auction to one of our three experimental treatments. As soon as the auctions begin, we place the first bid on the items based on the rules of the treatments they have been randomly assigned to. In treatment 1, our control condition, we do not intervene in the bidding. In treatment 2, we place a jump bid. In treatment 3, we place an automatic bid, which implies that Catawiki’s bidding system will place incremental bids up to our bid on our behalf. The amount we bid will be uniformly randomly drawn from the set {30, 35, 40, 45, 50}. After all auctions have ended, we request the platform for the bidding data. If we happen to win an auction despite our low bids, we buy the item for the price that we have bid, plus 9% buyer’s fee and the shipping costs. We will then attempt to resell it to a local diamond purchaser.
Randomization Method
randomization done in office by a computer
Randomization Unit
treatments assigned to the items offered in the online auction.
the size of bid assigned to each item.
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
1
Sample size: planned number of observations
1200
Sample size (or number of clusters) by treatment arms
400 treatment 1
400 treatment 2
400 treatment 3
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
The Board of the Faculty of Social and Behavioral Sciences, Utrecht University
IRB Approval Date
2019-04-01
IRB Approval Number
FETC19-016(Rijt)

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials