The Timing of Bids in Internet Auctions

Many bidders in eBay use bidding strategies that involve late bids, incremental bids, or both. Based on field evidence, we discuss the manner in which late bids are caused both by sophisticated, strategic reasoning and by irrationality and inexperience; the interaction of late bidding with incremental bidding; and the relation between market design and artificial agent design. Participants in internet markets can be human bidders bidding in person or artificial agents used by human bidders. Thus, the performance of market rules depends on what behavior the rules elicit from human and artificial agents. At the same time, the performance of software agents, and the decisions of bidders whether to use them, depends on how they interact with humans and other software agents in the market.