Online Auctions: Pragmatic Survey and Market Analysis

Online Auctions: Pragmatic Survey and Market Analysis

James K. Ho (University of Illinois at Chicago, USA)
DOI: 10.4018/978-1-61520-611-7.ch041
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Abstract

The Internet is a new medium of communication connecting potential partners in trade worldwide. The initial frenzy over its promises led to grossly exaggerated valuations of business models that were mere transplantations of existing processes to the alternative channel. Now that the bubble has burst, more sensible and critical thoughts can be turned to true transformations that are creating and nurturing markets of the future. Online auction is one of the very few cases that has held a steady course, as evidenced in the success to date of eBay.com. Founded in September 1995, eBay has become a global trading platform with presence in 39 markets where on any given day, there are more than 113 million listings across 50,000 plus categories. In 2009, at least 86 million people will buy and sell well over $2000 worth of goods every second (www. ebay.com). To survey the state of development of online auctions apart from eBay, on a pragmatic rather than theoretical basis, we examine variations in auction mechanisms, and give examples of implementation online at this writing. The commonly used terminology and definition of auction models can be found in e.g. McAfee and McMillan (1987). For conciseness and consistency, the www prefix and .com suffix are omitted from the URL of corresponding companies, and all lowercase is used throughout.
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A Survey Of Online Auctions

The Internet is a new medium of communication connecting potential partners in trade worldwide. The initial frenzy over its promises led to grossly exaggerated valuations of business models that were mere transplantations of existing processes to the alternative channel. Now that the bubble has burst, more sensible and critical thoughts can be turned to true transformations that are creating and nurturing markets of the future. Online auction is one of the very few cases that has held a steady course, as evidenced in the success to date of eBay.com. Founded in September 1995, eBay has become a global trading platform with presence in 39 markets where on any given day, there are more than 113 million listings across 50,000 plus categories. In 2009, at least 86 million people will buy and sell well over $2000 worth of goods every second (www.ebay.com). To survey the state of development of online auctions apart from eBay, on a pragmatic rather than theoretical basis, we examine variations in auction mechanisms, and give examples of implementation online at this writing. The commonly used terminology and definition of auction models can be found in e.g. McAfee and McMillan (1987). For conciseness and consistency, the www prefix and .com suffix are omitted from the URL of corresponding companies, and all lowercase is used throughout.

Key Terms in this Chapter

Proxy Bidding: Auctioneer bids on behalf of a bidder to counter incoming bids up to maximum specified by the bidder.

Topological Analysis: Online auction market modeling and analysis methodology using only operational data without expert knowledge of specific markets or details of financial transactions

Second Price Auction: Auction where winner pays second highest bid plus a nominal increment.

Unique Bid Auctions: Auctions where only unique bid amounts are eligible to win. Often used as lottery or strategy game for product promotion or advertising.

Reverse Auction: Buyer lists item wanted for sellers to bid on offer. Lowest bid wins.

Sniping: Bidding strategy to withhold bid until last seconds of a fixed deadline, second price auction

Dutch Auction: i) Auction where the price drops until accepted by a bidder, or stopping at reserve minimum; ii) Auction of multiple quantities of same item on eBay.com where top bidders pay lowest bid among them.

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