Second-chance offers and buyer reputation systems: theory and evidence on auctions with default

0575063 - NHU-C 2024 RIV NL eng J - Journal Article
Engelmann, Dirk - Frank, J. - Koch, A. K. - Valente, M.
Second-chance offers and buyer reputation systems: theory and evidence on auctions with default.
Rand Journal of Economics. Roč. 54, č. 3 (2023), s. 484-511. ISSN 0741-6261. E-ISSN 1756-2171
Institutional support: Cooperatio-COOP
Keywords : sequential auctions * 2nd-price auctions * online feedback
OECD category: Applied Economics, Econometrics
Impact factor: 2.3, year: 2022
Method of publishing: Open access
https://doi.org/10.1111/1756-2171.12448

Winners in online auctions frequently fail to complete purchases. Major auction platforms therefore allow “second-chance” offers (the runner-up bidder pays his own bid price) and let sellers leave negative feedback on buyers who default. We show theoretically that (i) all else equal, the availability of second-chance offers reduces bids, (ii) sellers have no incentive to exclude bidders, even if they are nearly certain to default, (iii) buyer reputation systems reward bidders known to default with a positive probability. Our experiments show that the economic forces identified in the theoretical model are important enough to have predictive power for bidder behavior.
Permanent Link: https://hdl.handle.net/11104/0344904