Wednesday, October 06, 2004

# Posted 6:56 AM by Patrick Belton  

AND THE OXBLOG PRIZE IN ECONOMICS GOES TO: ‘Bidding on eBay: Strategic Behaviour in Second-Price, Continuous-Time, Fixed-Duration Auctions’, by German academic Axel Ockenfels and Harvard’s Alvin Roth. And who said game theory could never be useful?

Sidenote: the best bit of the article comes on page four, in which the authors describe the strategies of proxy bidding and sniping bidding (i.e., where you wait until the final seconds - thereby incurring a risk factor whose terms combine the possibility someone else will outsnipe you with the countervailing risk your internet connection won't record your sniping bid if it falls too close to the end of the auction). In November 2000, the designers of the web service esnipe.com, which automates sniping bidding, put their company up for sale. Amusingly, the first bid came on day ten of the auction, the last day. And the last three bids, including a bid which won the auction at a final price of $35,877.77, came in the last minute during which time the price rose over $10,000, from $25,300 (one increment over the second highest bid one minute before the end.)

In either case, though, you may want to think twice before purchasing nuclear powered submarines off of eBay, nice company though it is.
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