We conducted a field experiment to test the benefit from late bidding
(sniping) in online auction markets. We compared sniping to
early bidding (squatting) in auctions for newly-released DVDs on
eBay. Sniping led to a statistically significant increase in our average
surplus. However, this improvement was small. The two bidding
strategies resulted in a variety of other qualitative differences in the
outcomes of auctions. We show that a model of multiple concurrent
auctions, in which our opponents are naive or incremental bidders
as identified in the lab, explain the results well. Our findings illustrate
how the overall impact of naivete, and the benefit from sniping
observed in the lab, may be substantially attenuated in real-world
market settings. (JEL D44)
Ely, Jeffrey C., and Tanjim Hossain.
"Sniping and Squatting in Auction Markets."
American Economic Journal: Microeconomics,