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Transcript of IMS 6485: Auctions, Portals, & Communities 1 Dr. Lawrence West, MIS Dept., University of Central...
IMS 6485: Auctions, Portals, & Communities
1Dr. Lawrence West, MIS Dept., University of Central [email protected]
Topics
• Common themes
• Dynamic pricing models and auctions
• Internet auction popularity
• Types of auctions & auction considerations
• The eBay case
• Portals
• Communities
• Common themes revisited
IMS 6485: Auctions, Portals, & Communities
2Dr. Lawrence West, MIS Dept., University of Central [email protected]
Auctions, Portals, & Communities on the Value Chain?
TRANS-PORTATIONCOMPANY
BROKER
INFORMATION FLOWS(SELLERS TO BUYERS)
FLOW OF GOODS
ADVERTISING .
INVOICE .
ORDER INFORMATION .
INFORMATION FLOWS(BUYERS TO SELLERS)
REQUEST INFORMATION .
PLACE ORDER .
MAKE PAYMENTS .
Animal
Vegetable
Mineral
INVENTORY
INVENTORY
INVENTORY
FACTORYWHOLE-SALER
INTERMEDIATE
GOODS
WHOLE-SALER
RETAILER
Where do these topics fall?
IMS 6485: Auctions, Portals, & Communities
3Dr. Lawrence West, MIS Dept., University of Central [email protected]
What Do These Topics Have in Common?
• Why do you think that these three topics are included in one chapter?
– Auctions
– Portals
– Communities
• "They are each based on feelings of shared interest and self-identification—in short, a sense of community."
• Could the same thing be said about shoppers at Wal Mart on Saturday morning?
IMS 6485: Auctions, Portals, & Communities
4Dr. Lawrence West, MIS Dept., University of Central [email protected]
Auctions
• The book (correctly) identifies auctions as "dynamic pricing models".
• What are other examples of dynamic pricing models?
– Volume discounts
– Members-only pricing
– Price discrimination
– Others?
• How are the prices "dynamic" in each instance?
• What determines how the final price is set?
• How are airline seat prices set?
IMS 6485: Auctions, Portals, & Communities
5Dr. Lawrence West, MIS Dept., University of Central [email protected]
Auctions (cont.)
• What has been the historical (pre-Internet) role of auctions?
• When do we see them used?
• When are they typically not used?
• Why would a seller expose themselves to the risk of an unexpectedly low price at an auction?
• What conditions must be true for an auction to be a viable selling and buying strategy
IMS 6485: Auctions, Portals, & Communities
6Dr. Lawrence West, MIS Dept., University of Central [email protected]
Dynamic Pricing
• Many forms of dynamic pricing, including auctions, are used when the seller does not know how much the buyer may value the item
• In other cases, the seller may know things about the buyer that causes them to think they can charge more, or must charge less, to get the buyer's business
– What is price discrimination
– Name examples of price discrimination
• Legal
• Illegal
IMS 6485: Auctions, Portals, & Communities
7Dr. Lawrence West, MIS Dept., University of Central [email protected]
Dynamic Pricing (cont.)
• Any market where haggling or negotiation takes place represents a dynamic pricing scenario
• Marked prices for products were sticky when it was difficult to change the physical price
• What has been the history of technologies that enabled dynamic pricing of goods (pre-Internet)?
IMS 6485: Auctions, Portals, & Communities
8Dr. Lawrence West, MIS Dept., University of Central [email protected]
Dynamic Pricing (cont.)
• What are the fundamental advantages to the seller of dynamic pricing?
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IMS 6485: Auctions, Portals, & Communities
9Dr. Lawrence West, MIS Dept., University of Central [email protected]
Dynamic Pricing (cont.)
• Consumers usually resent dynamic pricing
– May account for prevalence of fixed pricing strategies in many US markets that would be dynamic elsewhere
– Trend toward fixed price auto sales, a traditionally dynamically priced market segment
IMS 6485: Auctions, Portals, & Communities
10Dr. Lawrence West, MIS Dept., University of Central [email protected]
Auctions
• Why have Internet-enabled auctions become so popular?
– Liquidity (matching sellers with buyers)
– Price discovery
– Price transparency
– Market Efficiency—the market clears
– Lower transaction costs
– Consumer aggregation/Network Effects
• Consumers do not resent (or at least don't blame the seller) over the inherent dynamic pricing in auctions
IMS 6485: Auctions, Portals, & Communities
11Dr. Lawrence West, MIS Dept., University of Central [email protected]
How Do Auctions Affect Us?
• Do we want to use auction sources for procurement (upstream in the value chain)?
• Do we want to use auctions to sell products or services?
– Routine method of sale?
– Special case method?
• Do we want to host auctions for some other purpose:
– Revenue?
– Community building?
– Brand enhancement?
– Etc?
IMS 6485: Auctions, Portals, & Communities
12Dr. Lawrence West, MIS Dept., University of Central [email protected]
Different Types of Auctions—Advantages of Each
• Sealed bid—best bid wins• Vickrey auction—highest bid
wins but pays price of 2d highest bid
• English auction—traditional • Dutch auction—falling price
auction• Dutch Internet—ascending
price, multiple unit, lowest 'clearing' price is paid by all winners
• Japanese auction—like English but buyers must bid at each level
• Yankee auction—multiple unit. Price and quantity bid determine winnner
• Reverse auction—like English but sellers bid down prices
• Group buying—Like Yankee auction but sellers are bidding low prices with quantities
• Name your own price• Double auction—stock
markets
IMS 6485: Auctions, Portals, & Communities
13Dr. Lawrence West, MIS Dept., University of Central [email protected]
Auction Considerations
• Type of Product—Prices difficult to discover, perishable, commodity
• Product Life Cycle—late
• Channel Issues—Don't compete with existing channel
• Type of Auction to choose
• Initial Price Setting—Set low to rope in buyers
• Bid Increments—Low increments to maintain momentum
• Length of Auction
• Number of Items to Offer—Keep lot sizes lower if possible
• Price Allocation Rules—Differ by whether public or private
• Closed (private) vs. Public Bidding Rules
IMS 6485: Auctions, Portals, & Communities
14Dr. Lawrence West, MIS Dept., University of Central [email protected]
Consumer Behavior at Auctions
• See interesting discussion of
– Psychology of auctions
– Fraud and abuse
– Trust
• What personal experience and opinions do you have with each of these issues?
IMS 6485: Auctions, Portals, & Communities
15Dr. Lawrence West, MIS Dept., University of Central [email protected]
eBay
• Wow!!! Don't you wish you had…?
• What made eBay work?
– Auctions an important early driver of eBay's success
– What application of business case issues do we see in eBay?
– What eCommerce issues apply to eBay?
• "eBay now bills itself as a trading platform"
– What is the nature of eBay's expansion?
– What were the key enablers?
• Is eBay a merchant or a service provider?
IMS 6485: Auctions, Portals, & Communities
16Dr. Lawrence West, MIS Dept., University of Central [email protected]
Portals
• What is a portal?
• What are their revenue models
– Past?
– Present?
• Why are they so valuable?
– What single aspect of a portal has the most effect on value?
– How has this aspect affected the development efforts for portals?
IMS 6485: Auctions, Portals, & Communities
17Dr. Lawrence West, MIS Dept., University of Central [email protected]
Lessons from the Yahoo Case
• What are they?
• How important is content in Yahoo's portal?
– What has Yahoo been doing to manage content cost?
– Why can this be successful?
• Scalability
IMS 6485: Auctions, Portals, & Communities
18Dr. Lawrence West, MIS Dept., University of Central [email protected]
Communities
• How do virtual communities compare with physical communities?
• Can you form a relationship with someone you've never met?
– "Some argue that virtual communities are an adequate, even superior, replacement for traditional communities…"
– What do you think?
IMS 6485: Auctions, Portals, & Communities
19Dr. Lawrence West, MIS Dept., University of Central [email protected]
Communities and Business Models
• How do communities generate revenue (and how much)?
– For profit?
– Just enough to support the community?
• Read the discussion of moral boundaries between commerce and community?
– Is this a moral issue or one of consumer preference?
IMS 6485: Auctions, Portals, & Communities
20Dr. Lawrence West, MIS Dept., University of Central [email protected]
Types of Communities
• What are the revenue models or motivations for the managers of each of these types of communities?
– General communities
– Practice communities
– Interest communities
– Affinity communities
• Self and group identification
– Sponsored communities
IMS 6485: Auctions, Portals, & Communities
21Dr. Lawrence West, MIS Dept., University of Central [email protected]
Portals & Communities
• How are portals and communities similar and different?
• Which characteristic of each adds value to the other?
• Can characteristics of either add value to auction sites?