Abstract and Keywords
This article outlines the theoretical, empirical, and experimental contributions that address, in particular, bidding behavior in Internet auctions and the auction design in single-unit Internet auctions. Revenue equivalence generally breaks down with bidder asymmetry and the interdependence of values. There is evidence on the Internet for a specific kind of overbidding, occurring when there is also competition on the supply side. There is strong evidence both for the existence of incremental and of late bidding in Internet auctions. The phenomena appear to be driven partly by the interaction of naive and sophisticated bidding strategies. Multi-unit demand typically increases the strategic and computational complexities and often results in market power problems. The emergence of Internet-specific auction formats, such as advertisement position auctions, proxy bidding, and penny auctions, initiated a whole new research literature that already feeds back into the development and design of these auctions.
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