Are Incremental Bidders Really Naive? Theory and Evidence from Competing Online Auctions

This paper studies di¤erent bidding strategies in simultaneous online auctions. I propose a model in which incremental bidding strategy arises out of equilibrium and weakly dominates proxy bidding strategy. When there is a \u85xed ending time, late bidding can be a best response to some non-equilibrium strategies. Using the data collected from eBay auctions, I show that incremental bidders are more likely to win an item compared with proxy bidders and last-minute bidders. Incremental bidders who switch among auctions pay lower prices than proxy bidders and incremental bidders who stick to one auction. Further, the number of last-minute bidders decreases when there are more auctions running in parallel