THE ROLE OF THE BIDDING PROCESS IN PRICE DETERMINATION: JUMP BIDDING IN SEQUENTIAL ENGLISH AUCTIONS.

This paper uses data collected from a series of public auctions of used cars in New Jersey to examine how strategic bidding affects price determination in open-outcry English auctions. “Jumps” in the bidding, which occur when a new offer exceeds the old offer by more than the minimum bid increment, are highly pervasive and consistently related to the item’s presale estimated price. The size of the jumps is not affected by the selling order, however. This jump bidding pattern suggests that open-outcry auctions are more appropriately interpreted with models that assume common-item valuations rather than models assuming private valuations. ( JEL D44) [ABSTRACT FROM AUTHOR]