Operational efficiency of decentralized Internet auction mechanisms
Electronic Commerce Research and Applications
Proceedings of the 12th ACM conference on Electronic commerce
On-Line Auctions with Buy-It-Now Pricing: A Practical Design Model and Experimental Evaluation
International Journal of Electronic Commerce
Web Intelligence and Agent Systems
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Online auctions have become a pervasive transaction mechanism for e-commerce. As the largest online marketplace in the world, eBay is an attractive case study that enables the study of online auctions utilizing data involving real people and transactions. In this paper, we present a detailed investigation and analysis of multiple online auction properties including: consumer surplus, sniping, bidding strategy and their cross-relationships. Our goal is to evaluate the theoretical foundations of online auctions and discover patterns and behaviors hidden due to the lack of real and extensive transaction data. Among our findings, we uncover an important correlation among sniping and high surplus ratios, which implies the uncertainty of true value in a competitive environment. The key issue is the wrong assumption that bidders' valuations are independent from each other, which leads to inefficient auctions. In order to address the inefficiencies of current online formats we introduce a declining price auction model customized for online transactions. Conceptually, this model ought to deal with the complexities of competition in an online environment while maximizing social welfare.