Bidding behaviours in online auctions :|evidence from a used car market

Abstract

This thesis investigates the impact of sellers’ different strategies and the bidders’ behaviors on the auction outcome among different auction formats. We aim to complement and extend the existing literature by providing evidence on how different levels of the secret reserve price affect the winning bid and the probability of sale in an emerging market by using high-frequency bid data of an online auction website for second-hand cars, ikinciyeni.com. Furthermore, we discuss how the bidders’ entry decisions and bidding strategies change according to their experience and perception of the different auction formats. Using the data on 42,621 auctions with 2,228,960 bids recorded in 2020, we find a significant and positive impact of the secret reserve price level on the sales price controlling for the auction and car characteristics. Also, we conclude that the presence of a secret reserve with a positive opening price decreases the sellers’ revenue compared to a zero secret reserve-positive opening price auction. Lastly, it is found that setting a higher secret reserve price significantly reduces the likelihood of a sale.