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The Effect of Shill Bidding upon Prices: Experimental Evidence

Research output: Contribution to journalJournal article

Published

Journal publication date04/2007
JournalInternational Journal of Industrial Organization
Journal number2
Volume25
Number of pages23
Pages291-313
Original languageEnglish

Abstract

This paper explores, through a series of experiments, the effect of shill bidding upon revenues and prices in auctions. We study the practice of shill bidding in a common value framework. Our findings are consistent with the prediction that, if bidders are aware of the possibility of seller participation in an auction, profits will be reduced on average. We also study factors that affect bidder and seller participation decisions. Shill bidding can alleviate the problem of the winner's curse by lowering the price and it can, thus, provide benefits to bidders.