98:
624:. Each time, the higher-value bidder wins the item and pays the lower-value to the seller. Then, one day they decide to cooperate: they agree that from now on, the higher-value bidder will bid 1 and the lower-value bidder will bid 0. This way, the higher-value bidder will always win the item for free. Such cooperation could be very beneficial to both bidders in the long run. The problem is, it cannot be enforced, because both bidders have an incentive to say that their value is higher than it really is.
25:
1324:
1460:- the symmetric PBE strategy is to jump if-and-only-if the signal is at least 36. So if Xenia's value is e.g. 33 and Yakov's value is 39, then Xenia will pass and Yakov will jump, so Yakov will win and pay only 24. In contrast, in a simple Japanese auction, Xenia will stay up to her value of 33, so Yakov will win and pay 33.
1560:
Since bidding proceeds in discrete steps, jump bidding can alter the outcome. For example, suppose the initial price is 0, the minimal increment is 2 and the values are 9 and 10. Then, without jumping, the 9-bidder will increase the price to 2, the 10-bidder will increase the price to 4, the 9-bidder
827:
In the first stage, we take Xenia's viewpoint. Assume that Yakov's strategy is to jump if-and-only-if his signal is at least T. We calculate Xenia's best response. There are four cases to consider, depending on whether Xenia/Yakov jumps/passes. The following table shows Xenia's expected net gain in
597:
At first glance, jump bidding seems irrational. Apparently, in an
English auction, it is a dominant strategy for each buyer whose price is above the displayed price, to always bid the minimal allowed increment (e.g. one cent) above the displayed price. By bidding higher, the bidder gives up the
1021:
1569:
Some authors claim that jump-bidding reduces the seller's revenue, since the signaling allows bidders to collude and reduce the final price. Therefore, it may be more profitable for the seller to use an auction format that does not allow jump-bidding, such as a
1547:
Jump-bidding is a very crude form of communication: it does not communicate my actual value, it only signals that my value is above a certain threshold. The careful selection of the threshold and the jump-height guarantee that this communication is a
1319:{\displaystyle {\begin{aligned}&&E&=E\\\implies &&K&=E\\\implies &&K&=2T/3&&(when\,\,T\leq 36)\implies &&T&=3K/2&&(when\,\,K\leq 24)\end{aligned}}}
1561:
to 6, the 10-bidder to 8, and the 9-bidder will have to quit, so the 10-bidder will win and pay 8. But, if the 9-bidder jumps from 0 to 8, the 10-bidder might quit and the 9-bidder will win and pay 8.
1026:
601:
However, in practice buyers increase the displayed price much more than the minimal allowed increment. Buyers may even sometimes offer an increase on their own high bid, seemingly irrationally.
1473:
If Yakov does not jump, Xenia wins immediately and pays 24. But if Yakov does not jump and Xenia also does not jump, she can win the item and pay Y. And, the expected value of Y conditioned on
796:
806:
In the first stage, each bidder bids either 0 (no jump) or K (jump). If exactly one bidder jumped, then this bidder wins the item and pays K and the auction is over. Otherwise -
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The outcome of this PBE is substantially different than that of a standard
Japanese auction (with no jump option). As an example, let the jump-level be
1538:
If Xenia also does not jump, then Yakov wins and pays X. The expected value of X given Y is 2Y/3 = 26. But by jumping he could have paid only 24.
46:
612:
When bidding is costly, or when time is costly, jump-bidding allows the bidders to reduce their total costs and get to the outcome faster.
824:
In the second stage, there is a symmetric equilibrium in which each bidder exits at his observed value - Xenia exits at X and Yakov at Y.
631:. By jump-bidding, the jumper signals that he has a high value, and so the other bidder should quit immediately if his value is lower.
1535:
Why does Yakov jump to 24 and not proceed in smaller steps? Let's analyze Yakov's payoff if he does not jump and then proceeds to 39:
1470:
If Yakov also jumps, this means that Yakov's value is above 36. This means that Xenia will lose anyway - whether she jumps or not.
821:
in which each bidder jumps if-and-only-if his value is above a certain threshold value, T. To show this, we proceed backwards.
312:
1541:
If Xenia jumps, then Yakov loses and his net-gain is 0, instead of the positive net-gain that he could have by winning.
1467:
Why does Xenia give up at 24 and not proceed to 33? Let's analyze Xenia's payoff if she jumps and then proceeds to 33:
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with the following parameters, where A B and C are independent uniform random variables on the interval (0,36):
1679:
Isaac, R. Mark; Salmon, Timothy C.; Zillante, Arthur (2007). "A theory of jump bidding in ascending auctions".
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39:
that states a
Knowledge editor's personal feelings or presents an original argument about a topic.
813:) starting at the current price. The initial price is 0 if no bidder jumped, or K if both jumped.
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1589:- the practice of a bidder placing a bid that is below what they believe a good is worth.
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427:
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125:
1613:
Daniel, Kent D.; Hirshleifer, David A. (1999). "A Theory of Costly
Sequential Bidding".
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Two bidders, Xenia and Yakov, participate in an auction for a single item. This is a
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At the threshold (X=T), Xenia should be indifferent between jumping and passing:
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387:
1649:
Avery, Christopher (1998). "Strategic Jump
Bidding in English Auctions".
1631:
1586:
1530:, which in this case is only 22. So, by not jumping, Xenia can only gain.
620:
Consider two veteran bidders, that compete with each other many times in
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604:
Several explanations have been suggested to this behavior.
36:
personal reflection, personal essay, or argumentative essay
16:
Auction signalling strategy using seemingly irrational bids
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Manipulating the outcome using the discreteness of prices
1552:: it is best for both bidders to communicate truthfully.
809:
In the second stage, there is an incremental auction (a
1463:
This outcome seems counter-intuitive from two reasons:
589:, substantially more than the minimal allowed amount.
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is the practice of increasing the current price in an
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627:Here jump-bidding comes into play. It works like a
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1681:Journal of Economic Behavior & Organization
598:opportunity to win the item at a lower price.
1328:So the symmetric PBE strategy (at least when
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717:The value of the item for both bidders is
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65:Learn how and when to remove this message
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1374:if-and-only-if his signal is at least
817:We show that there exists a symmetric
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791:{\displaystyle V:=(X+Y)/2=(A+2B+C)/2}
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802:The auction proceeds in two stages:
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1577:Other authors dispute this claim.
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819:perfect Bayesian equilibrium
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1651:Review of Economic Studies
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533:Private electronic market
1550:self-enforcing agreement
1347:{\displaystyle K\leq 24}
228:Generalized second-price
1663:10.1111/1467-937x.00041
1615:SSRN Electronic Journal
223:Generalized first-price
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1492:{\displaystyle Y<X}
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707:{\displaystyle Y:=B+C}
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672:{\displaystyle X:=A+B}
608:Reducing bidding costs
278:Simultaneous ascending
45:by rewriting it in an
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1453:{\displaystyle T=36}
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193:Discriminatory price
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503:Revenue equivalence
188:Deferred-acceptance
1595:- "bidding fever".
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956:{\displaystyle E}
896:{\displaystyle E}
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1657:(2): 185–210.
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55:February 2017
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44:
38:
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32:This article
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1017:
911:Yakov passes
910:
844:
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638:
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583:jump bidding
582:
576:
428:Domain names
357:
283:Single-price
183:Common value
61:
52:
33:
1687:: 144–164.
1587:Bid shading
845:Yakov jumps
836:Xenia jumps
682:Yakov sees
647:Xenia sees
143:Anglo-Dutch
126:Bidding fee
1600:References
398:Algorithms
298:Unique bid
253:No-reserve
1339:≤
1304:≤
1252:⟹
1242:≤
1186:⟹
1132:⟹
1092:−
1041:−
981:−
931:−
865:−
616:Signaling
463:Virginity
318:Walrasian
248:Multiunit
158:Brazilian
138:Amsterdam
1707:Category
1581:See also
1499:is only
1434:. Hence
538:Software
528:Ebidding
453:Spectrum
418:Children
388:Contexts
268:Scottish
238:Knapsack
233:Japanese
163:Calcutta
90:Auctions
82:a series
80:Part of
1565:Effects
433:Flowers
423:Players
413:Charity
373:Suicide
368:Sniping
363:Rigging
343:Shading
333:Bidding
308:Vickrey
263:Reverse
213:Forward
208:English
121:Chinese
116:All-pay
41:Please
593:Puzzle
518:Online
483:Theory
458:Stamps
448:Slaves
323:Yankee
218:French
198:Double
168:Candle
131:Dollar
473:Wives
438:Loans
403:Autos
203:Dutch
106:Types
1484:<
1166:<
1106:<
1055:<
995:<
945:<
885:<
879:<
468:Wine
443:Scam
358:Jump
258:Rank
1689:doi
1659:doi
1627:hdl
1619:doi
577:In
408:Art
1709::
1685:62
1683:.
1671:^
1655:65
1653:.
1641:^
1625:.
1617:.
1574:.
1448:36
1422:24
1405:.
1342:24
1307:24
1245:36
905:0
728::=
693::=
658::=
581:,
84:on
1695:.
1691::
1665:.
1661::
1635:.
1629::
1621::
1518:3
1514:/
1510:X
1507:2
1487:X
1481:Y
1445:=
1442:T
1419:=
1416:K
1393:2
1389:/
1385:K
1382:3
1362:K
1336:K
1310:)
1301:K
1296:n
1293:e
1290:h
1287:w
1284:(
1278:2
1274:/
1270:K
1267:3
1264:=
1259:T
1248:)
1239:T
1234:n
1231:e
1228:h
1225:w
1222:(
1214:3
1210:/
1206:T
1203:2
1200:=
1193:K
1178:]
1175:T
1172:=
1169:X
1163:Y
1159:|
1155:Y
1152:[
1149:E
1146:=
1139:K
1124:]
1121:T
1118:=
1115:X
1112:,
1109:X
1103:Y
1099:|
1095:Y
1089:V
1086:[
1083:E
1080:=
1073:]
1070:T
1067:=
1064:X
1061:,
1058:T
1052:Y
1048:|
1044:K
1038:V
1035:[
1032:E
1001:]
998:X
992:Y
988:|
984:Y
978:V
975:[
972:E
951:]
948:T
942:Y
938:|
934:K
928:V
925:[
922:E
891:]
888:X
882:Y
876:T
872:|
868:Y
862:V
859:[
856:E
798:.
786:2
782:/
778:)
775:C
772:+
769:B
766:2
763:+
760:A
757:(
754:=
751:2
747:/
743:)
740:Y
737:+
734:X
731:(
725:V
714:.
702:C
699:+
696:B
690:Y
679:.
667:B
664:+
661:A
655:X
566:e
559:t
552:v
68:)
62:(
57:)
53:(
49:.
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