Faculty of Economics and Business Administration Publications Database

A Comparison of Different Pay-per-Bid Auction Formats

Natter, Martin
Volume: 31
Number: 4
Pages: 368 - 379
ISSN-Print: 0167-8116
Link External Source: Online Version
Year: 2014
Keywords: Pay-per-bid auction; Bidding fees; Online marketing; Electronic commerce; Pricing; Auction

Pay-per-bid auctions are a popular new type of Internet auction that is unique because a fee is charged
for each bid that is placed. This paper uses a theoretical model and three large empirical data sets with
44,614 ascending and 1,460 descending pay-per-bid auctions to compare the economic effects of differ-
ent pay-per-bid auction formats, such as different price increments and ascending versus descending
auctions. The theoretical model suggests revenue equivalence between different price increments and
descending and ascending auctions. The empirical results, however, refute the theoretical predictions:
ascending auctions with smaller price increments yield, on average, higher revenues per auction than
ascending auctions with higher price increments, but their revenues vary much more strongly. On
average, ascending auctions yield higher revenues per auction than descending auctions, but results
differ strongly across product categories. Additionally, revenues per ascending auction also vary much
more strongly.