Auction on the Inetrnet
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Transcript of Auction on the Inetrnet
Auction on the InternetAuction on the InternetAuction on the InternetAuction on the InternetWhat’s Being Auctioned, and How?What’s Being Auctioned, and How?
Chen GeChen Ge
Xu XinXu Xin
Liu XueLiu Xue
Tian TianTian Tian
History of Internet Auctions
• Before 1993, text-based internet newsgroups and email discussion lists.
• May 1995, Onsale---the earliest Web-based
• Sept. 1995, eBay• Later, Yahoo!, Amazon
……
Size DistributionMonthly volume($) Number of sites
Under 10,000 83
10,001--100,000 27
100,001--1,000,000 21
Over 1,000,000 7
Size Distribution
Site Monthly Revenue
eBay $70,000,000
First Auction 5,000,000
Onsale 5,000,000
uBid 2,000,000
Going-Going-Sold 1,800,000
Auction Vine 1,500,000
Encore Auction 1,300,000
What to sell Inexpensive -- which would more likely have been
seen at garage sales or flea markets rather than at traditional auctions
How to find -- classify into categories and sub-
categories -- different sites offer different sets of
category system
What to sell
Category FeaturingSpecializin
g
Collectibles 90 56
Electronics & PCs
48 9
Jewelry 17 1
Software 16 0
Used equipment 15 7
Sporting goods 13 4
Travel Services 7 5
Real Estate 4 2
Wine 3 2
What to sell Collectibles --offered by more than 60% sites --accounted for at least 85% of listings
and 75% of revenues in eBay --improve matching of buyers to sellers --high-priced collectibles still remain in
“Sotheby”s.
What to sell Goods ought to be auctioned --inexpensive collectibles --used goods --small and easy to ship --goods in limited supply and demands is
unknown
What to sell Goods ought to be auctioned in
the future: SERVICES --tickets, hotel reservations, etc.
--few site offer the auctions of services nowadays
--obstacle: local services vs. global internet
Time Duration the length of time — average aucti
on remain open --mean 9.3 days per auction --shortest: Onsale’s 60-mins “express auct
ions” and First Auction’s 3-mins “flash auctions”
--longest: 90-days at WW Sales site
Minimum Bids and Reserve Prices
Minimum bids --below which no bids will be accepted
Reserve prices --if the highest bid doesn’t exceed the
amount of the reserve price, then no good will be sold
--indicated but not revealed to the bidders in most of the sites
Minimum Bids and Reserve Prices
Effects on the auction --low-minimum bids, high-reserve prices
--generate interest --build bidding momentum --more opportunity to observe the
bidding of others --more aggressive bidding
Minimum Bids and Reserve Prices
Effects on the auction --Overuse of high reserve prices
--make the winner upset sometime --drive away bidders
Buyout Prices Buyout price/maximum
accepted bid level --allow the buyer to buy an early end to
the auction by submitting a sufficiently high bid
--gain and lose of the buyers and sellers in this kind of activities
How????
Merchant Sites: offers its own merchandise for sale; happens to conduct its transactions through auction;
e.g. Onsale: http://www.onsale.com/onsale/
Listing-Agent Sites: agent for other sellers, allowing others to register and running the auctions on their behalf;
e.g. eBay: http://www.ebay.com/
Sites Number representativesListing sites 96 eBay, Auction Vine
(only qualified sellers)…
Merchant sites
25 Onsale, First Auction
Combined agent/merchant sites
11
Not clear 10
Total 142
Auctioneers’ FeesMerchant sites derive income directly
from the sale of their items-Agent sites derive their operating revenues from
fees charged to buyers and sellers;
Online fees are much cheaper:-Sotheby’s , e.g. charges for about more than 30%
of the final bid price; while eBay charges only around 5%
Auction FeesAt eBay:-all fees paid by the seller,-two components to the seller’s fees:1) insertion fee for the auction listing, ranging
from $0.25 to $2.00;
2) percentage of the amount of the final bid price, declines with the size of the sale: 5% of amount under $25, 2.5% of additional amount between $25-$1000, 1.25% of additional excess of 1000.
Auction FormatsAuction Formats
Auction FormatsAuction Formats
English ascendin
g
Dutch ascending
Sealed-bid ascending
Double Auction
Total
Number of sites 121 3 21 4 142
English Auctions-Traditional English Auction: In a room,
auctioneer: “going…going…gone!”
-English Auction on Internet: longer, geographically diverse, no auctioneer.
e.g. eBay, auctions end 7 days after they begin.
English Auctions ProcedureFind your interested item-view the current high bid-decide whether to raise it by filling out your
own bid amount
-submit -see the update status (whether you are the
highest bidder now)-(received “outbid notification” email)
Problem: “sniping”Waiting until the last minute
English Auction Game
Two alternatives:-short “extension period” Most are 5 minutes long, this damages the asynchro
nous bidding convenience-“proxy bidding” mechanismEveryone has a little elf, and he should tell the elf the
most he wants to spend and wait it to outbid other elves.
most popular now, 65/142 use it.
Sealed-bid AuctionsTwo types:1.First-price sealed-bid auctionwinning bidder pays his bid amount. 7 sites and
8 more
2.Second-price sealed-bid auctionthe winning bidder pays one increment over the
second-highest bid received. In 5 sites.
Dutch Auctions
-Price starts at some relatively high level
-Continues until the first bid determines the winner
-Price falls down as time goes by
-No observation of actual transaction.
Double AuctionsFast Parts-electronic components, only successfully on
LabX-laboratory equipment
Dallas Gold & Silver Exchange (DGSE)-jewelry
BidNask-no active trading floors
Multi-unit Auctions-Previous ones: many people bid for one good.
-Multi-unit Auctions:many people bid for many identical goods.
Multi-Unit Pricing Rules in Ascending-Bid Auctions
Two pricing rules:
-Discriminatory or pay-your-bid ruleeach winning bidder pays the amount of her own bid; mainly
used at the merchant sites
-Uniform price ruletypically called a “Dutch auction” online; each winning
bidder pays the amount of the lowest accepted bid; a fairly standard for multi-unit auctions at the listing sites
Possibility of Demand Reduction
-The bidder will pay every unit the same price of the first price he bid for one unit, thus, there is possibility that he will lie that he only want less than what he really wants.
-A mechanism may solve this by making the bidder pays each unit different prices.
Open IPO: A Sealed-bid Multi-Unit Auction
- Initial public offerings of corporate stock through sealed-bid multi-unit auctions.
- Using uniform-price rule, charging the amount of the lowest accepted per-share bid to each of the winning bidders.
- Possibility of demand reduction
Package Bidding-Bidding on combinations of related
items.
-the Wine bid online auction of wines: organizes the auctioned wines into groups which might be more valuable to some bidders.
Cheat & Game-Strategic Manipulations:1) Shilling:An attempt by the seller to drive up the price of
good.“Overshoot” & “Retract”
Anti-shilling rule
Cheat & Game-Strategic Manipulations:2) Bid Shielding:The bidders put in an early lowball bid (say $10), then gets
a false ID to put in an extremely high bid (say $500) on the same item.
Retract before the end and win at $10.
Enforcement of “Bid Shielding” Guarantee
Cheat & Game-FraudHow does a buyer know she can trust the seller?
1) Social norm of honesty: people are basically good
2) File formal complaints with Attorneys General or the U.S. Post Office
3) Feedback and rating system4) Third-party escrow service (i-Escrow)
Cheat & Game-FraudHow does a buyer know she can trust the seller?
I-Escrow:Average transaction size is $300;Sales volume grows at a rate of 25% per month.
Vs. eBay: average price of a good is $30 and the transaction volume is growing at 12% per month.
Case & DataSize estimates for eBay, Yahoo!, and Amazon,
Summer 1999
(estimated standard errors in parentheses)
Auctions closing per dayRevenues per
month
eBay 340,000 $190,000,000
($180,000,000)
Yahoo! 88,000 $19,000,000
($7,900,000)
Amazon 10,000 $2,000,000
($620,000)
Case & Data
eBay Yahoo! Amazon
differences
hard close time
5-min extension
period
10-min extension
period
more data searching
listing fee no fees listing fee
similarities
categories of goods
fixed-length English auction bidding rules
auction-listing procedures
ConclusionMerits• Lower cost• More flexibility• Classified advertisements
Demerits• Shilling & Bid-shielding• Fraud