This paper studies bidding behavior in a dynamic auction setting that is similar to auctions offered on the Internet. I allow bidders to acquire outside prices while the auction is in progress. Searching is costly and bidders are heterogeneous in their search costs. The model generates a tractable equilibrium and gives interpretation to three intuitive bidding patterns that are frequently observed in the data: early, late and multiple bidding. The key feature of the equilibrium is that early bidding is monotone in search cost which leads to efficient sorting.

Additional Metadata
Keywords Dynamic auction, Information acquisition, Internet auction
Persistent URL dx.doi.org/10.1016/j.ijindorg.2017.06.006
Journal International Journal of Industrial Organization
Citation
Vadovič, R. (2017). Bidding behavior and price search in Internet auctions. International Journal of Industrial Organization, 54, 125–147. doi:10.1016/j.ijindorg.2017.06.006