Hard and Soft Closes: A Field Experiment on Auction Closing Rules

  • Daniel Houser
  • John Wooders

Abstract

Late bidding in online auctions has attracted substantial theoretical and empirical attention. This paper reports the results of a controlled field experiment on late bidding behavior. Pairs of $50 gift certificates were auctioned simultaneously on Yahoo! Auctions, using a randomized paired comparison design. Yahoo? site allows sellers to specify whether they wish to use a hard or soft close, and this enabled us to run one auction in each pair with a soft close, and the other with a hard close. An advantage to our randomized paired design is that differences in numbers of bidders, numbers of simultaneously occurring auctions and other sources of noise in bidding behavior are substantially controlled when drawing inferences with respect to treatment effects. We find that auctions with soft-closes yield economically and statistically significantly higher mean seller revenue than hard-close auctions, and that the difference is due to those cases where the soft-close auction is extended.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Ariely, Dan, Ockenfels, Axel, and Roth, Alvin. (December 2002). “An Experimental Analysis of Ending Rules on Internet Auctions,” mimeo, Harvard University.Google Scholar
  2. Gupta, Neeraj. (2001). “Internet Auctions: A Comparative Study of Seller Options on eBay, Amazon, and Yahoo!” Undergraduate thesis, Harvard College.Google Scholar
  3. Houser, Dan and Wooders, John. (2000). “Reputation in Auctions: Theory, and Evidence from eBay.” University of Arizona Working paper #00-01.Google Scholar
  4. Roth, Alvin and Ockenfels, Axel. (2000). “Last Minute Bidding and the Rules for Ending Second-Price Auctions: Theory and Evidence from a Natural Experiment on the Internet.” National Bureau of Economic Research Working paper No. 7729.Google Scholar
  5. Roth, Alvin and Ockenfels, Axel. (Month 2001). “Last Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet.” American Economic Review, volume, 1341–78.Google Scholar

Copyright information

© Springer 2005

Authors and Affiliations

  • Daniel Houser
    • 1
  • John Wooders
    • 2
  1. 1.George Mason UniversityUSA
  2. 2.University of ArizonaUSA

Personalised recommendations