Sniping in soft-close online auctions: empirical evidence from overstock
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Sniping in soft-close online auctions: empirical evidence from overstock Wen Cao 1 & Qinyang Sha 2 & Zhiyong Yao 1 & Dingwei Gu 3 & Xiang Shao 1 # Springer Science+Business Media, LLC, part of Springer Nature 2019
Abstract The existing studies suggest that sniping is an equilibrium strategy in hard-close online auctions, but not in soft-close ones. In this paper, we use a unique, largescale data set from soft-close Overstock and hard-close eBay to document sniping phenomena under the two different closing rules. Estimation results show that sniping is prominent on both websites, but they are prevalent at different times. On eBay, sniping occurs right before the auction close, while on Overstock sniping happens predominantly in a short window of time before the triggering period, during which any additional high bid automatically extends the online auction. Furthermore, the revenue effect of sniping is significantly stronger on Overstock than on eBay. Keywords Sniping . Hard-close auctions . Soft-close auctions . Revenue effect
* Zhiyong Yao [email protected] Wen Cao [email protected] Qinyang Sha [email protected] Dingwei Gu [email protected] Xiang Shao [email protected]
1
School of Management, Fudan University, 670 Guoshun Road, Shanghai 200433, China
2
Megaputer Intelligence, Bloomington, IN, USA
3
School of Economics, Fudan University, Shanghai 200433, China
Marketing Letters
1 Introduction Sniping is a last-minute auction bidding practice wherein many bids are submitted close to or at the very end of an auction. Online auction platforms like eBay have made hardclose auctions a key feature of their business model, but other auction types do exist. For example, Overstock uses soft-close auctions that extend the time of an auction if a bid is submitted within the last 10 min. Although sniping in hard-close auctions is to be expected, due to its obvious strategic advantages, our data surprisingly indicate that a similar amount of sniping takes place in soft-close Overstock auctions.1 This finding contradicts the existing literature (Malaga et al. 2010; Ockenfels and Roth 2006; and many others) that claims sniping to be an ineffective and suboptimal strategy for softclose auctions. To illustrate our finding, Fig. 1 plots the relative timings of about 670,000 bids on items listed for auction by large jewelry retailer Neimans Jewelry on hard-close eBay and soft-close Overstock auctions between November 2006 and October 2007. The distributions show that, on both websites, about 20% of the bids were placed during the last 1% of each auction’s duration. Our current study focuses on this neglected phenomenon of sniping in soft-close auctions. This paper examines this discrepancy by analyzing a unique, large-scale data set derived from real auction data on eBay and Overstock to observe sniping phenomena under two different auction closing rules. Our results contribute to the literature on online auctions in the following ways. First, sniping proves to be prevalent at different times for different auction t
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