Jumping and sniping at the silents: Does it matter for charities?

In most cases authors are permitted to post their version of the article (e.g. in Word or Tex form) to their personal website or institutional repository. Authors requiring further information regarding Elsevier's archiving and manuscript policies are encouraged to visit: a b s t r a c t a r t i c l e i n f o Despite its popularity as a fundraiser for charities, very little research has been done on the bidding and revenue properties of the silent auction. This paper examines the consequences of two behaviors common in silent auctions, jump-bidding and sniping, in laboratory experiments with endogenous participation. Our results suggest that deliberative jumping, the result of impatient bidders attempting to telescope time, tends to increase revenue, while deliberative sniping by experienced bidders tends to decrease it. We also show that when charities can encourage jumping and discourage sniping, silent auctions can perform as well as their sometimes more entertaining but more expensive alternative, the English auction. It comes as no surprise that three quarters of the corporate community involvement staff surveyed by the LGB Research Institute (2009) have reported an increase in requests from charitable organizations during the current recession. The surprise, perhaps, is that annual inflation-adjusted charitable contributions in the United States fell just 3.2% in 2009 and still exceeded $300 billion (Giving USA, 2010). In fact, corporate donations, which constituted $14.1 billion of this total, rose 5.5%, but much of this increase came from donations in kind, which swelled almost 30%. Because charities and non-profits have no direct use for some of these gifts, the problem of how best to transform them into cash has become more important than ever. Auctions represent one of the best known solutions to this " transformation problem. " For example, a recent survey by Giving USA (2008) found that almost 85% of non-profits hold at least one special event to raise funds, and that almost 30% of these events involved dinner and an auction. Not all charities choose the same format, but the silent auction is one of the most common: Chris Cowdrey, whose North London firm FunRaising Events organizes charity auctions, reports that silent auctions are responsible for 70% of his revenue in the current economic climate (Parkhouse, 2009). Casual empiricism is consistent with this observation: most of us know schools or churches or other non-profits that use silent auctions to raise some of …