Internet Auctions

Internet Auctions

Kevin K.W. Ho (The Hong Kong University of Science and Technology, Hong Kong)
DOI: 10.4018/978-1-60566-026-4.ch346
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Abstract

Year 2005 marks the 10th anniversary of eBay (http://www. ebay.com), the most successful online marketplace for Business-to-Consumer (B2C) and Consumer-to-Consumer (C2C) Internet auctions in this decade. As of December 2005, eBay has a major auction Web site and 26 sister Web sites operating all over the world and is enjoying a 37% quarterto- quarter growth in revenue (eBay, 2005). Before eBay existed, Internet auctions were mainly held in Internet forums and newsgroups (Lucking-Reiley, 1999, 2000). Nowadays, people can auction goods in cyberspace through Web sites such as eBay, Yahoo! auction (http:// auctions.yahoo.com), and Amazon auction(http://s1.amazon. com). Designated Web sites for niche markets, such as antiques or electronic products are also established. With the rapid growth of Internet auctions, economists and information systems (IS) researchers are using these Web sites to conduct field experiments and to collect transaction records to support their research more and more frequently. They are also interested in analyzing new features developed by these Web sites, such as Peer Review System and Buy-It- Now (BIN) auction, and bidders’ behaviors, such as snipping. This article aims to provide a brief review of the Internet auction research conducted in the past few years and to explore the future research trends in this area.
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Background

Auction is one of the most popular business activities in the world. Each year, goods worth hundreds of billions of dollars are auctioned online and off-line. The types of goods auctioned range from very expensive items such as land and properties, government permits/licenses, and antiques to relatively minor items such as used stuffs, toys, and food (McAfee & McMillian, 1987; Lucking-Reiley, 2000). Recently, even job openings are being auctioned via the Internet (see, Job Dumping, http://www.aucnet.com) (Lee, 1997, 1998). On the contrary to the argument that the “frictionless” nature of electronic commerce would reduce the profit of sellers (Bakos, 1997), AUCNET shows that electronic marketplaces can bring a win-win situation to both sellers and buyers. AUCNET has, on the one hand, increased sellers’ profit, and on the other hand, provided an efficient market for auction participants with the help of information technology and other supporting features (Lee, 1998).

In response to customers’ suggestions and to improve its usability, new features have been developed in Internet auction Web sites in the past few years. While some of them are brand new auction mechanisms, others are new features which aim to build up the trust between auction participants. Among them, Buy-It-Now auction and Peer Evaluation System are the most important ones.

Before we start our discussion, readers are reminded that the terminologies used by auction Web sites are sometimes different from auction literature. The most significant difference is the definition of a “Dutch auction.” Dutch auction is a descending auction commonly used for the auction of perishable goods such as fish and cut flowers (McAfee & McMillian, 1987). However, auction Web sites use the same term to describe multiple-item English auction (Bapna, Goes, & Gupta, 2001). Hence, readers are reminded to check with individual Web sites on the terminologies if they are in doubt.

Key Terms in this Chapter

Dutch Auction: It is a common descending auction for perishable goods. However, some Internet auction Web sites used this term to describe a multiple-item English auction.

Peer Evaluation Profile: It is a reputation profile of the auction participants based on her/his behaviors in her/his previous transactions on the Web site.

Auction With Soft Close: It is an Internet auction with an extendable end time. The end time of auction will be extended if a new bid submitted within the last few minutes of the auction.

Buy-it-Now (BIN) Auction: It is a variation of English auction developed by eBay. The seller posts a BIN price and agrees to close the auction at this preset price. The BIN option will disappear and the auction will convert to an English auction when a bidder submits a bid which is higher than the reserve price of the auction.

Buy Price (BP) Auction: It is a variation of English auction developed by Yahoo! auction. Its setting is similar to BIN auction. Unlike BIN auction, BP auction will not covert to English auction in any circumstances.

Auction With Hard Close: It is an Internet auction with a fixed end time. This closing method provides an opportunity for bidders to snipe in an auction.

Snipping: It is a jargon for “last-minute bidding.” It is only possible if the auction Web site is having a fixed end time (or “hard close”).

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