Auctions
Yunon Chuang
What are auctions?

Auction Markets:
– traders transact directly against the orders
of other traders by communication through
a single centralized intermediacy
– Public sales to concentrate supply and
demand and, discover prices of products
and services
When Auctions Succeed

If posted offer and private negotiations
are inefficient or fail
– The good or service is unique and/or costs
and quality cannot be determined
– There is no shared understanding of attributes
or criteria by which to determine the cost
– Bargaining costs are high relative to the cost
of the good
– Unique goods where the number of buyers are
uncertain
Forms of Auctions
 English
Auction
 Dutch Auction
 Offer Auction
 Bid auction
English Auctions
Sequentially increasing bids until
one active bidder remains
 bidders always know the level of
the current best bid
 Used for artwork and some
valuable items, such as
Sotheby’s (http://www.sothebys.com),
and Christie’s

(http://www.christies.com)
Dutch Auctions


The auctioneer lowers the
offer price sequentially
(represented by a going
clock) until a buyer agrees
to pay for the offer price
(set by the stoppage of
the clock).
Bidders have to choose
how high to bid without
knowing the others’
decisions
Dutch Auction: Trick of game

When the announced price progressively
lowered, the probability of obtaining a
gain grow.
However, due to potential
competitors increase, the
probability of securing this
gain is diminishing as well.
First Price Sealed Bid Auctions

or called Tender
Opposite of offer auction
 Buyer can make bids sequentially
 sellers can only indicate that a bid is
accepted.

Second Price Sealed Bid Auctions
An institution in which sellers can make
offers sequentially
 Buyers are able to accept any offer, but
not to make any bids

Auction and Electronic commerce
Buyers
One
One
Sellers
Many
Many
Negotiations
using EDI
Web-based
Sales Auction
Web-based
procurement
auctions
Web-based
many-to-many
auctions
Web Characteristics
---new dimension for auctions




Lower transaction costs
better reach to potential sellers and bidders
improving search/find capabilities
New auction methods--multidimensional
auction
– “Customized auction”: price, item amounts,
quality, delivery spec, other contractual specs

The usage of intelligent agents– spiders
Web-based Auction Theories
Multidimensional auctions
 Product Presentation and impact of
multimedia tech
 Role of quality of web-based public or
private info in Web-based auctions
 Knowledge and Design the Website and
form of Web-based auctions

Electronic Auctions

Expanded Reach
– from co-location to distribution in time or
place
– access to new customer base
New ways of signaling and sharing nonprice information (chat, messaging,
notes)
 New ways of organizing key interrelated transaction processes

Electronic Auctions
Potential of changing the way worth of
goods is set by transforming valuation
and related transaction processes
 Enable new forms of social and other
interactions

eBay--www.ebay.com





English Auction
More than 1,000 categories of items available
for bids
person-to-person auctions better security:
providing built-in safeguards on Word of
mouth counts: seller information page gives
positive and negative remarks of sellers or
bidders
Verified user program at $5 fee to ensure
everybody traceable and legally accountable
Real bargains on last-minutes items on
Going-Going-gone page
Bidding Rule in ebay

First register to be an eBay member.

Find an item you'd like to bid on by
browsing through listings.


When you find something you want,
Enter the amount of your bid, and click
the "review bid" button in the bidding
area.
Send the bid
Bidding Rule in ebay


(con’t)
As the bidder waits for the auction to
close (this is usually several days),
(s)he'll receive a daily email telling the
bidder if (s)he is the high bidder or if
(s)he been outbid by another eBay
member.
Going, going, gone! When the auction
closes, if the user is the high bidder,
(s)he must email the seller within three
business days to claim the item. This
signifies that (s)he is the winner
Selling Rules in eBay
Register first
 Set up the selling account. Place credit
card on file with eBay


Gather the info the seller need before
preparing the listing:

The item description

the URL (web site address) for any photos

the category the merchandise will be listed under
Selling Rules in eBay (con’t)



In Sell Your Item form, fill in the info, and reviews
and submits the listing.
When your auction closes, the seller has to contact
the winning bidder or bidders within three
business days. The seller is to confirm the final cost,
including any shipping charges, and tell them where
to send payment. When the bidder meets your
payment terms, the seller fulfill your end of the
agreement by sending them the item. The auction
forms a binding contract between the seller and the
winning bidder or bidders.
The seller’s item is finally sold