Bidding behavior in on-line auctions: an examination of the eBay Pokemon card market

eBay is the most successful of the many consumer-related on-line auction sites on the World Wide Web. Single-item auctions on eBay share characteristics with both English auctions and a hybrid combination of first-price and second-price sealed-bid auctions. Auctions on eBay allow bidders to choose between two different methods of bidding. A field study was conducted to determine the effects of bidding strategy on revenue realized in auctions conducted under the eBay market structure. The research draws on traditional auction theory derived from an examination of "live" auctions not mediated by computers. The results indicate differences between predicted and observed behavior. Two groups of bidders pay "insurance" premiums to ensure that their bidding is successful. These findings should generalize to other auction Web sites with similar market structures and have implications for bidders, sellers, and managers of auction Web sites.