eBay's Crowded Evenings: Competition Neglect in Market Entry Decisions
Management Science
The Sealed-Bid Abstraction in Online Auctions
Marketing Science
Rational Herding in Microloan Markets
Management Science
Herding behavior in online P2P lending: An empirical investigation
Electronic Commerce Research and Applications
A decision tree model for herd behavior and empirical evidence from the online P2P lending market
Information Systems and e-Business Management
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People often observe others' decisions before deciding themselves. Using eBay data for DVD auctions we explore the consequences of neglecting nonsalient information when making such inferences. We show that bidders herd into auctions with more existing bids, even if these are a signal of no-longer-available lower starting prices rather than of higher quality. Bidders bidding a given dollar amount are less likely to win low starting price auctions, and pay more for them when they do win. Experienced bidders are less likely to bid on low starting price auctions. Remarkably, the seller side of the market is in equilibrium, because expected revenues are nearly identical for high and low starting prices.