Abstract
Simultaneous online auctions, in which the auction of all items being sold starts at the same time and ends at the same time, are becoming popular especially in selling items such as collectables and art pieces. In this paper, we analyze the characteristics of bidders (Reactors) in simultaneous auctions who update their preauction value of an item in the presence of influencing bidders (Influencers). We represent an auction as a network of bidders where the nodes represent the bidders participating in the auction and the ties between them represent an Influencer-Reactor relationship. We further develop a random effects bilinear model that is capable of handling covariates of both bidder types at the same time and account for higher‐order dependence among the bidders during the auction. Using the model and data from a Modern Indian Art auction, we find that Reactors tend to update their values on items that have high preauction estimates, bid on items created by high investment risk artists, bid selectively only on certain items, and are more active in the second half of the auction. Implications for the auction house managers are discussed.
Highlights
For the last three decades, simultaneous auctions have become one of the most popular auction settings for selling high-priced affiliated private value items, including FCC radio bandwidth spectrum 1, U.S treasury bills 2, and timber 3
The set of bidders who attend these auctions remain the same throughout the auction event. Such an auction setting is successful in situations where the items are highly complementary and the buyers have a demand for more than one item
Broadcasting companies typically need to purchase more than one bandwidth of Journal of Probability and Statistics the radio spectrum; art collectors buy more than one item of their favorite artist and so on. This auction format has become popular in online auctions to sell collectables and fine arts 4
Summary
For the last three decades, simultaneous auctions have become one of the most popular auction settings for selling high-priced affiliated private value items, including FCC radio bandwidth spectrum 1 , U.S treasury bills 2 , and timber 3. Using this rich and innovative framework, we examine the characteristics of Reactors using a randomeffects dyadic relation model 8. Our paper attempts to investigate their characteristics in these simultaneous auctions Prior studies on this issue 12, 13 , limited, have mainly focused on understanding the underlying psychological factors that result in value updating behavior. They identified factors including bidder rivalry, social effects, and escalation of commitment that lead to a “win at any cost” mentality of the Reactors when they start bidding irrationally in order to win the item 11. We discuss the implications of our work and present directions for future research
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