The Extent of Internet Auction Markets

Internet auctions attract numerous agents, but only a few become active bidders. A major difficulty in the structural analysis of internet auctions is that the number of potential bidders is unknown. Under the independent private value paradigm (IPVP)the valuations of the active bidders form a specific record sequence. This record sequence implies that if the number n of potential bidders is large, the number of active bidders is approximately 2 log n, explaining the relative inactivity. Empirical evidence for the 2 log n rule is provided. This evidence can also be interpreted as a weak test of the IPVP

The Timing of Bid Placement and Extent of Multiple Bidding: An Empirical Investigation Using eBay Online Auctions

Online auctions are fast gaining popularity in today's electronic commerce. Relative to offline auctions, there is a greater degree of multiple bidding and late bidding in online auctions, an empirical finding by some recent research. These two behaviors (multiple bidding and late bidding) are of ``strategic'' importance to online auctions and hence important to investigate. In this article we empirically measure the distribution of bid timings and the extent of multiple bidding in a large set of online auctions, using bidder experience as a mediating variable. We use data from the popular auction site \url{www.eBay.com} to investigate more than 10,000 auctions from 15 consumer product categories. We estimate the distribution of late bidding and multiple bidding, which allows us to place these product categories along a continuum of these metrics (the extent of late bidding and the extent of multiple bidding). Interestingly, the results of the analysis distinguish most of the product categories from one another with respect to these metrics, implying that product categories, after controlling for bidder experience, differ in the extent of multiple bidding and late bidding observed in them. We also find a nonmonotonic impact of bidder experience on the timing of bid placements. Experienced bidders are ``more'' active either toward the close of auction or toward the start of auction. The impact of experience on the extent of multiple bidding, though, is monotonic across the auction interval; more experienced bidders tend to indulge ``less'' in multiple bidding.Comment: Published at http://dx.doi.org/10.1214/088342306000000123 in the Statistical Science (http://www.imstat.org/sts/) by the Institute of Mathematical Statistics (http://www.imstat.org

Trust and Experience in Online Auctions

This paper aims to shed light on the complexities and difficulties in predicting the effects of trust and the experience of online auction participants on bid levels in online auctions. To provide some insights into learning by bidders, a field study was conducted first to examine auction and bidder characteristics from eBay auctions of rare coins. We proposed that such learning is partly because of institutional-based trust. Data were then gathered from 453 participants in an online experiment and survey, and a structural equation model was used to analyze the results. This paper reveals that experience has a nonmonotonic effect on the levels of online auction bids. Contrary to previous research on traditional auctions, as online auction bidders gain more experience, their level of institutional-based trust increases and leads to higher bid levels. Data also show that both a bidder’s selling and bidding experiences increase bid levels, with the selling experience having a somewhat stronger effect. This paper offers an in-depth study that examines the effects of experience and learning and bid levels in online auctions. We postulate this learning is because of institutional-based trust. Although personal trust in sellers has received a significant amount of research attention, this paper addresses an important gap in the literature by focusing on institutional-based trust

ATTac-2000: An Adaptive Autonomous Bidding Agent

The First Trading Agent Competition (TAC) was held from June 22nd to July 8th, 2000. TAC was designed to create a benchmark problem in the complex domain of e-marketplaces and to motivate researchers to apply unique approaches to a common task. This article describes ATTac-2000, the first-place finisher in TAC. ATTac-2000 uses a principled bidding strategy that includes several elements of adaptivity. In addition to the success at the competition, isolated empirical results are presented indicating the robustness and effectiveness of ATTac-2000's adaptive strategy

Online Auctions

The economic literature on online auctions is rapidly growing because of the enormous amount of freely available field data. Moreover, numerous innovations in auction-design features on platforms such as eBay have created excellent research opportunities. In this article, we survey the theoretical, empirical, and experimental research on bidder strategies (including the timing of bids and winner's-curse effects) and seller strategies (including reserve-price policies and the use of buy-now options) in online auctions, as well as some of the literature dealing with online-auction design (including stopping rules and multi-object pricing rules).

The Effect of Shill Bidding upon Prices: Experimental Evidence

This paper explores, through a series of experiments, the effect of shill bidding upon revenues and prices in auctions. We study the practice of shill bidding in a common value framework. Our findings are consistent with the theoretical prediction that, if bidders are aware of the possibility of seller participation in an auction, shill bidding lowers profits on average. Shill bidding can alleviate the problem of the winner's curse by lowering the price and it can, thus, provide benefits to the bidders. Finally, even though there were too many bidders that submitted bids in these auctions, the number of entrants was not affected by the possibility of seller participation, which is also consistent with the theory.Auctions, Experiment, Shill Bidding, Entry

The relevance of primary dealers for public bond issues

We analyze the role of different kinds of primary and secondary market interventions for the government's goal to maximize its revenues from public bond issuances. Some of these interventions can be thought of as characteristics of a "primary dealer system". After all, we see that a primary dealer system with a restricted number of participants may be useful in case of only restricted competition among sufficiently heterogeneous market makers. We further show that minimum secondary market turnover requirements for primary dealers with respect to bond sales seem to be in general more adequate than the definition of maximum bid-ask-spreads or minimum turnover requirements with respect to bond purchases. Moreover, official price management operations are not able to completely substitute for a system of primary dealers. Finally it should be noted that there is in general no reason for monetary compensations to primary dealers since they already possess some privileges with respect to public bond auction

Economic Insights from Internet Auctions: A Survey

This paper surveys recent studies of Internet auctions. Four main areas of research are summarized. First, economists have documented strategic bidding in these markets and attempted to understand why sniping, or bidding at the last second, occurs. Second, some researchers have measured distortions from asymmetric information due, for instance, to the winner's curse. Third, we explore research about the role of reputation in online auctions. Finally, we discuss what Internet auctions have to teach us about auction design.

The Effect of Reputation on Selling Prices in Auctions

In economic approaches it is often argued that reputation considerations influence the behavior of individuals or firms and that reputation influences the outcome of markets. Empirical evidence is rare though. In this contribution we argue that a positive reputation of sellers should have an effect on selling prices. Analyzing auctions of popular DVDs at eBay we, indeed, find support for this hypothesis. Secondary, we unmask the myth that it is promising for eBay sellers to let their auction end at the evening, when many potential buyers may be online

Late and Multiple Bidding in Second Price Internet Auctions: Theory and Evidence Concerning Different Rules for Ending an Auction

In second price internet auctions with a fixed end time, such as those on eBay, many bidders ‘snipe’, i.e., they submit their bids in the closing minutes or seconds of an auction. Late bids of this sort are much less frequent in auctions that are automatically extended if a bid is submitted very late, as in auctions conducted on Amazon. We propose a model of second price internet auctions, in which very late bids have a positive probability of not being successfully submitted, and show that sniping in a fixed deadline auction can occur even at equilibrium in auctions with private values, as well as in auctions with uncertain, dependent values. Sniping in fixed-deadline auctions also arises out of equilibrium, as a best reply to incremental bidding. However, the strategic advantages of sniping are eliminated or severely attenuated in auctions that apply the automatic extension rule. The strategic differences in the auction rules are reflected in the field data. There is more sniping on eBay than on Amazon, and this difference grows with experience. We also study the incidence of multiple bidding, and its relation to late bidding. It appears that one substantial cause of late bidding is as a strategic response to incremental bidding.