Is Sniping a Problem for Online Auction Markets?

12 Pages Posted: 9 Feb 2015 Last revised: 23 Mar 2023

See all articles by Matthew Backus

Matthew Backus

Cornell University - Department of Economics

Tom Blake

eBay Research Labs

Dimitriy Masterov

affiliation not provided to SSRN

Dimitriy Masterov

eBay Research Labs

Steven Tadelis

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: February 2015

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.

Suggested Citation

Backus, Matthew and Blake, Tom and Masterov, Dimitriy and Masterov, Dimitriy and Tadelis, Steven, Is Sniping a Problem for Online Auction Markets? (February 2015). NBER Working Paper No. w20942, Available at SSRN: https://ssrn.com/abstract=2562232

Matthew Backus (Contact Author)

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

Tom Blake

eBay Research Labs ( email )

2065 Hamilton Avenue
San Jose, CA
United States

Dimitriy Masterov

affiliation not provided to SSRN

Dimitriy Masterov

eBay Research Labs ( email )

2065 Hamilton Avenue
San Jose, CA
United States

Steven Tadelis

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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