Winning bidders in online auctions frequently fail to complete the transaction. Because enforcing bids usually is too costly, auction platforms often allow sellers to make a "secondchance" offer to the second highest bidder, to buy at the bid price of this bidder, and let sellers leave negative...

Winners in online auctions frequently fail to complete purchases. Major auction platforms therefore allow "second-chance" offers, where the runner-up bidder pays his own bid price, and they let sellers leave negative feedback on buyers who default. We show theoretically that (i) all else equal,...