Late Bidding, Single Bidding and the Role of Experience in Online Auctions: Evidence from Huuto.net

Abstract

Online auctions are widely used in sales of collectible items and casual items. This mar-ket is constantly growing due to the growing number of people with access to the inter-net. Even in the newly emerged internet auctions, the traditional auction theory is still providing useful insights into the bidding strategies in auctions with given properties. The question regarding optimal bidding strategy is of interest due to the fact that it pro-vides bidders an edge in competitive markets.

Previous studies, which have mostly focused on the eBay-auction model, show that the optimal bidding strategy is to wait until the ending of an auction. These studies also show that there is a tendency to shift towards this strategy while gaining experience as a bidder. However, a closer examination reveals that the strategic advantages of late bid-ding are obsolete in auctions with a soft-close ending rule, such as Huuto.net and Ama-zon. While this has not been previously tested in Huuto.net, empirical results from Am-azon have been as hypothesized. Testing these hypotheses is conducted in this study using similar statistical tests as the previous studies as the methodological approach. The tests are conducted on a data gathered from two product categories in Huuto.net: IPhones and Moomin mugs. This thesis provides a comparative insight into bidding strategies in online auctions with a soft-close ending rule.

This study shows that late bidding does not occur in Huuto.net, but in fact quite the opposite. This study shows also that pure single-bidding occurs when a clearer common value component is present, and that the experienced bidders place fewer bids in both product categories.