Online Auctions: Insights into the First Bidder Discount

Internet auctions like Amazon or eBay use an ascending bid auction as the basic auction format. This basic auction format can be augmented by various price features: the First Bidder Discount is one example. In a First Bidder Discount auction the bidder receives a discount on the price to pay if the bidder was the first to place a bid. The objective of this paper is to analyse this mechanism and to present a theoretical model describing the rules of a discount auction. Furthermore, an analysis of bidder behaviour and the timing of bids in internet auctions that include an added discount is investigated.