Information Revelation in an Online Auction with Common Values

The Hard Close auction has become a familiar auction format in online markets and in a private value framework this dynamic second-price auction format has experimentally been tested in recent studies. Considering a common value framework, Bajari and Hortaçsu (2003) demonstrate that in the Hard Close auction format bidders, using a sniping strategy, do not provide information during the auction. We provide contrary results from a laboratory experiment. Bidders provide information during the bidding process, resulting in different bid functions that depend on the bidders private information rank

Determinants of Online Auction Participation: How Much Do Web Knowledge and Risk Perception Matter?

This study extends the research on online consumer behavior by examining the effect of Web knowledge and risk perception on individual attitude towards and intention to participate in online auction. The survey findings show that individuals with high Web knowledge tend to form positive attitudes towards online auction. By contrast, individuals who have heightened concerns about Internet privacy and security show less favorable attitudes towards online auction. Consistent with the attitude-intention model, attitude appears to mediates the effect of know and risk perception on intention. Research and practical implications of these results are discussed

Sudden Termination Auctions – An Experimental Study

The design of markets has become a major issue due to the capability of online operators to implement almost any set of market rules overnight. With this study we contribute to the literature of market design by presenting a theoretical and experimental analysis of sudden termination auctions. Our main focus is on the candle auction that has a positive termination probability at any time in the course of the auction. The second price candle auction which is technically demanding and rarely implemented offline proves to be a faster and equally efficient alternative to standard hard close auctions.auctions, termination rules, electronic markets

Information Revelation in an Online Auction with Common Values

The Hard Close auction has become a familiar auction format in online markets and in a private value framework this dynamic second-price auction format has experimentally been tested in recent studies. Considering a common value framework, Bajari and Hortaçsu (2003) demonstrate that in the Hard Close auction format bidders, using a sniping strategy, do not provide information during the auction. We provide contrary results from a laboratory experiment. Bidders provide information during the bidding process, resulting in different bid functions that depend on the bidders private information rank.auctions, electronic markets, experiments

Pricing Web Services

This paper focuses on the challenges associated with composing and pricing web services. We present the results of an online experiment, where subjects were confronted with a variety of choices and decisions relating to web service markets and service composition. Our analysis shows that people expect the price of a composite web service to be lower than the sum of the prices of the elementary services, that is, users are not willing to pay for aggregation by a third party. To obtain a viable business model for composite web services, non-standard pricing mechanisms, such as auctions and negotiations, possibly supported by electronic agents, have to be taken into consideration. Usage-based pricing schemes, combined with an option to switch to a flat subscription, seem most appropriate to penetrate the developing market for web services.Peer Reviewe

Intimidation or Impatience? Jump Bidding in On-line Ascending Automobile Auctions

We run a large field experiment with an online company specializing in selling used automobiles via ascending auctions. We manipulate experimentally the maximum amount which bidders can bid above the current standing price, thus affecting the ease with which bidders can engage in jump bidding. We test between the intimidation vs. costly bidding hypotheses of jump bidding by looking at the effect of these jump-bidding restrictions on average seller revenue. We find evidence consistent with costly bidding in one market (Texas), but intimidation in the other market (New York). This difference in findings between the two markets appears partly attributable to the more prominent presence of sellers who are car dealers in the Texas market.

Revisiting Bidder Heterogeneities in Online Auctions (The Case of Soft vs. Hard Closing Formats)

The current study offers an insight into how auction ending rules can affect distribution online bidders’ strategies. While traditional wisdom in this area suggested that auction ending rules can encourage and suppress certain bidding behaviors, limited efforts have been taken to investigate how they can affect winning likelihood and price premium distribution across different bidding strategies. To evaluate such impacts of auction ending rules, auction data were collected from two auction websites (eBay and Dellauction.com). A total of 288 auction transactions were collected and later used in the data analyses. Initial results indicate that auction ending rules do affect winning likelihood and distribution of price premium across different bidder classes. A bidding strategy that was found effective in generating higher price premium under an auction ending rule may not necessarily be effective under a different auction ending rule. Practical implications are offered at the end of the study

Sealed bid second price auctions with discrete bids

A single item is sold to two bidders by way of a sealed bid second price auction in which bids are restricted to a set of discrete values. Restricting attention to symmetric pure strategy behavior on the part of bidders, a unique equilibrium exists. When following these equilibrium strategies bidders may bid strictly above or below their valuation, implying that the item may be awarded to a bidder other than the high valuation bidder. In an auction with two acceptable bids, the expected revenue of the seller may be maximized by a high bid level not equal to the highest possible bidder valuation and may exceed the expected revenue from an analogous second price auction with continuous bidding (and no reserve price). With three acceptable bids, a revenue maximizing seller may choose unevenly spaced bids. With an arbitrary number of evenly spaced bids, as the number of acceptable bids is increased, the expected revenue of the seller and the probability of ex post inefficiency both may either increase or decrease

An Empirical Classification of Bidders in Online Auctions

Auctions have been a popular way of transaction on the Internet. Most of the studies of auction assume participants attending the auction are homogeneous. However, this assumption is open to question. In fact, every participant has his own personality, risk attitude, behavior, and cost when attending online auctions. This study takes an empirical approach and uses four variables, time of entry, time of exit, number of bids, and number of jump bids, to find the heterogeneity among bidders. We first used k-means clustering method to identify the types of bidders of online auctions, and then used C5.0 decision tree learning algorithm to find the rules to differentiate bidders. A taxonomy of four types of bidders is proposed in the study, which include observers, adventurers, opportunists, and early players. The results also suggest pacing of the auctions is an important factor that will affect bidder’s behavior in online auctions

Does it Pay Off to Bid Aggressively? An Empirical Study

In this research, we empirically investigate the payoff of aggressive bidding in an online auction. To address our research question, we use a unique and very rich dataset containing actual market transaction data for approximately 7,000 pay-per-bid auctions. Our research design allows us to isolate the impact of bidding aggressively in an attempt to signal a high valuation on the probability to win an auction. In particular, we analyze more than 600,000 bids placed manually by approximately 2,600 distinct auction participants. The strong and significantly negative effect of aggressive bidding on the likelihood of winning an auction revealed by our analysis suggests that an aggressive bidding strategy is not beneficial in increasing the chances of winning an online auction