Auctions!
Prof. Sheizaf Rafaeli
E-Commerce
1
Auctions
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Everything is (becoming?) negotiable.
Auctio = increase, )‫(יוסף‬
(but not all auctions are about increasing prices!)
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Auctions are useful for price discovery
Auctions are useful to move merchandise quickly
Is everything auctionable?
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Auctions
A competition-based method of allocating
scarce goods.
 Often, the auctioneer is not owner but agent.
 Rules set by seller, price set by bidder.
 Most efficient, purest of markets .
 Is it the most fair mechanism?
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Auctions very popular in B2B
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Let’s play the “auction a dollar”
game
Wanna buy a dollar for a nickel?
 Anyone can play. Highest bidder gets it.
 Both highest and second highest bidder pay.
 Payment to occur online, in view of class.
 All bids are public, audible and not sealed,
in view of class.
 No union, monopoly or “rings” allowed.
 TIME IS MONEY!
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Auction Terminology
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Anonymity - Open
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everyone pay the same price,
or what they bid?
(Cry) or Sealed Bid
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Confidentiality - are
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participant(s) and
winner(s) identities
revealed
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Secrecy - is inventory
amount disclosed
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Timing - pre-specified
closing time, interval,
price-determined, etc.
Discriminative? - does
Restrictions
Increments
Reserve price
Internet Auctions
Kumar and Feldman
IBM Research :
http://www.ibm.com/iac/papers/auction_fp.pdf
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Auction Types
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English, Dutch, First-price sealed-bid, Vickrey
(uniform second-price sealed bid)
Naming problems
(in financial community:
English is sealed, Dutch is something else)
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Winner’s Curse: The winner actually bids the
furthest from the average bid, which is the best
estimate of the item’s actual worth )reasonable
information).
Do you really want to hire the employee passed
over by all others? John
Glenn’s story.
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Auction types The English Auction
Private vs. Common valuation
 Audible bids, open outcry, ascending price
 reserve price, “knocked down”
 Roles of anonymity and experience
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Auction types:
Dutch Auction
Descending price
 Used to sell flowers and fish, credit, and
antiques.
 Seller could (due to psychology) more
likely receive top price.
 Think about auction “frenzy”
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Auction types:
Sealed-Bid (discriminatory)
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A bidding period followed by a resolution
phase
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“Discriminatory” when more than one item
sold, at varying prices.
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Auction types:
Uniform Second Price
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Named for William Vickrey
)called “Dutch Auction” in the financial community(
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Highest bidder wins, but pays only the price
offered by second bidder
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Sealing is imperative.
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Auction types:
Double Auctions
Both bidders and sellers submit “bids”,
“asks”.
 Has roots in haggling
 Offers are ranked.
 Double dutch auction runs two sequential
clocks.
 Probably very attractive when
computerized.
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Other auction types
Simultaneous bidding (Japanese)
 Haphazard (random) order
 Handshake (Chinese) format
 Whisper
 Candle-light (time-interval)
 Silent
 Swiss (with regrets!)
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Auction Collusion and Tricks
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According to Fraud.org, online auctions were the #1
source (68%) of complaints in 1998, up from 26% in
1997.
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In 1999, things got worse...
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Auction Collusion and Tricks
ALL auction types can be manipulated
 Serious problem with trust
 Hence need for escrow, credit, evaluation
and performance data on participants.
 Rings, cartels and enforcement
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Avoiding Fraud in Auctions
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Understand how the
auction works.
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Check out the seller.
Check out buyers and shills.
Traceroute?
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Be especially careful if
the seller is a private
individual.
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Ask about delivery,
returns, warranties and
service.
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Be wary of claims about
collectibles.
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Use common sense to
guide you.
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Pay the safest way.
Get a physical address
 Let the auction site know
and other identifying
if you have a problem. It
information.
is their business.
Make use of http://www.ftc.gov, http://www.fraud.org
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Online Auction trust, ratings and
User Profiles
Person-to-Person Auctions
User Profile from Yahoo!
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Auction Strategies
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Try the psychology
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Take the Dutch descending auction flower
market simulation challenge, at:
http://research.haifa.ac.il/~
avinoy/auction/main.html
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Some other things for auction
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Blood, kidneys, wombs
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Auction resources
http://www.internetauctionlist.com/
the internet auction list
 http://www.AuctionAnything.com
 http://www.ebay.com
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Auction resources
Frictionless Commerce
MySimon
BotSpot
DealPilot
Nextag.com for haggling
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Israeli auction sites,
agents in auctions
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http://www.michraz-Ilmedina.co.il
http://www.2bid.co.il
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http://www.netaction.co.il
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http://www.4sale.co.il/
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http://www.vshop.co.il/
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http://www.10bid.com/
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http://www.priceit.co.il/
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http://www.olsale.co.il/
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http://www.rusure.com/
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http://www.bigdeal.co.il/
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http://www.salestorm.co.il/
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