The Impact of Soft-Close Auctions on Bid Behavior: A Randomised Controlled Experiment

Abstract

This thesis studies the effect of longer extensions on bidding behaviour in online auctions. The study uses a randomised controlled experiment through Pantbanken Sverige, a Swedish pawnbroker. The results indicate positive effects on the seller’s revenue due to longer extensions, although these effects were not statistically significant. The upper bounds of the confidence intervals do not rule out the possibility of price increases of ten percent when increasing the extensions from thirty to ninety seconds. Additionally, longer extensions significantly increase the probability of further bidding after triggering the first extension. This effect is stronger for gold items, where previous research has highlighted the strategic advantage of late bidding for common value goods. This study provides a first attempt at an empirical investigation of the dynamics of variations in the extensions in online auctions. The potential profitability increase in revenue emphasises the need for further research on the subject.