Jump bidding does not reduce prices: Field-experimental evidence from online auctions

Abstract

One feature of online auctions that has attracted much interest is jump bidding, whereby a bidder raises the price by more than what is needed to become the highest bidder. The effects of jump bidding on the final selling price are unknown because past observational studies could not separate bidder interest from bidder behavior. Our study involves an in vivo experiment during live auctions on a large online auction platform. We intervened early in auctions at low, non-competitive price levels, either through jump bidding or through incremental bidding, and randomly varied the magnitude of our intervention. In contrast to leading theories in the auction literature, which predict a negative effect of jump bidding on the final selling price, we find that our jump bidding intervention has no effect on the final selling price.