The Role of the Bidding Process in Price Determination: Jump Bidding in Sequential English Auctions

32 Pages Posted: 13 May 2005

See all articles by Yaron Raviv

Yaron Raviv

Claremont McKenna College - Robert Day School of Economics and Finance

Date Written: October 2004

Abstract

I study the sequence of bidding in an open-outcry English auction to examine how the strategic bidding process affects price determination. I do this by studying the anomalous nature of jump bidding in data I have collected from a series of public auctions of used cars in New Jersey. Jump bidding occur when a new offer is submitted that is above the old offer plus the minimum bid increment permitted. I find that jump biddings are an empirical regularity in all items sold. The jumps are a function of the presale estimate of the item's price but are not affected by the selling order. I suggest a way to use the Jump Biddings to determine whether an open-outcry auction is best interpreted with models that assume private- or common-item valuations, and conclude that these auctions are consistent with the common values interpretation.

Keywords: Auction

JEL Classification: D44

Suggested Citation

Raviv, Yaron, The Role of the Bidding Process in Price Determination: Jump Bidding in Sequential English Auctions (October 2004). Claremont Colleges Economics Working Paper No. 2004-11, Available at SSRN: https://ssrn.com/abstract=722811 or http://dx.doi.org/10.2139/ssrn.722811

Yaron Raviv (Contact Author)

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States
909-607-7305 (Phone)

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