Overbidding in electronic auctions: factors influencing the propensity to overbid and the magnitude of overbidding

This research investigates the buyer and seller characteristics that impact overbidding in electronic auctions. Specifically, the empirical analysis shows that customers with more total experience are less likely to overbid and that overbidding is less frequent for auction items with higher face values. When bidder experience pertains to the same product category, the frequency and magnitude of overbids are further reduced. This research also finds that consumers are more likely to overbid as the bidding environment becomes more competitive. Furthermore, auction item attributes, such as starting price, day/time of the auction, and shipping fees, are shown to impact the propensity to overbid and the magnitude of overbidding. The empirical results have important implications for understanding bidder behavior and for assisting online sellers in formulating more profitable selling strategies.