American International Journal of Social Science

ISSN 2325-4149(Print), ISSN 2325-4165(Online)

Analyzing Winner’s Curse in Gift Card Auctions
Emmett Dulaney

Abstract
In a perfectly competitive market, the price obtained for a homogeneous good, when auctioned, should be consistent when measured as a percentage of the final bid (including shipping) to the total value of the good and not exceed it. Using gift cards auctioned on eBay as a proxy, however, this study found that that was not the case and prices varied significantly during the time period studied with winner’s curse – paying more for an item that it is actually worth – occurring at an alarming rate. This study looked at overlapping time periods in the summer of 2016 and auctions involving gift cards for Home Depot, Walmart, and Amazon. Winner’s curse existed in only 2% of the Home Depot card auctions, but over 70% of the auctions for gift cards from Walmart and Amazon. Linear regression was used to look for a correlation between winner’s curse and three variables: a separate shipping charge, the number of bids received, and the feedback score associated with the seller.

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