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eBay Auctions - The Effect of Bid Increments and Proxy Bidding
 

eBay Auctions - The Effect of Bid Increments and Proxy Bidding

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    eBay Auctions - The Effect of Bid Increments and Proxy Bidding eBay Auctions - The Effect of Bid Increments and Proxy Bidding Presentation Transcript

    • The Effects of Proxy Bidding and Minimum Bid Increments within eBay Auctions Alex Rogers, Esther David & Nicholas R. Jennings University of Southampton, UK. Jeremy Schiff Bar-Ilan University, Israel.
    • Contents
      • Introduction
        • eBay auctions
      • eBay Auction Revenue
        • Proxy bidding
        • Pedestrian bidding
      • eBay Bid History
        • Number of observed bids
        • Bid timing
      • Bidding Strategies
        • Sniping
      • Conclusions
    • Contents
      • Introduction
        • eBay auctions
      • eBay Auction Revenue
        • Proxy bidding
        • Pedestrian bidding
      • eBay Bid History
        • Number of observed bids
        • Bid timing
      • Bidding Strategies
        • Sniping
      • Conclusions
    • eBay Auctions
      • Most common online auction:
        • 1.9 billions items listed & $44.2 billion gross merchandise sales in 2005.
      • eBay trivia
        • Largest item sold – WWII submarine.
        • Largest item listed – WWII aircraft carrier.
        • Most expensive item sold
        • – Gulfstream jet ($4.9 million)
    • eBay Auctions
      • Unique properties:
        • Fixed deadline.
        • Proxy bidding system.
        • Minimum bid increment.
      • Why study it?
        • Practical protocol for real world problems?
        • ‘ It’s like a second price auction but the revenue is the second highest price plus the minimum bid increment.’
        • ‘ Bidding as late as possible is the best strategy.’
    • eBay Auctions Rules
      • Seller set auction duration and starting bid.
      • Bidders enter maximum amount they are prepared to bid to a proxy bidding system .
      • First bid must exceed the starting bid.
      • Subsequent bids must exceed the current auction price by a minimum bid increment .
      • The bidder who entered the highest bid wins but pays minimum of highest bid and second highest bid plus minimum bid increment.
    • Example Starting bid: $1.99 Minimum bid increment: $0.25 Winner Auction Price Bid Bidder A $1.99 $3.50 A
    • Example Starting bid: $1.99 Minimum bid increment: $0.25 Winner Auction Price Bid Bidder A $3.50 $3.40 B A $1.99 $3.50 A
    • Example Starting bid: $1.99 Minimum bid increment: $0.25 Bid Not Accepted! Winner Auction Price Bid Bidder $3.60 C A $3.50 $3.40 B A $1.99 $3.50 A
    • Example Starting bid: $1.99 Minimum bid increment: $0.25 If D bids first, closing price could be $3.65, $3.75 or $3.85 depending on the bidding order. Bid Not Accepted! Winner Auction Price Bid Bidder D $3.75 $4.00 D $3.60 C A $3.50 $3.40 B A $1.99 $3.50 A
    • eBay Auctions Rules
      • eBay auctions are inefficient – the bidder with the highest valuation doesn’t always win.
      • The revenue depends on the order that bidders arrive and the minimum bid increment.
    • Contents
      • Introduction
        • eBay auctions
      • eBay Auction Revenue
        • Proxy bidding
        • Pedestrian bidding
      • eBay Bid History
        • Number of observed bids
        • Bid timing
      • Bidding Strategies
        • Sniping
      • Conclusions
    • eBay Auction Revenue
      • Initially consider 2 bidders.
        • eBay proxy bidding
        • Enter valuation as the maximum amount prepared to bid.
        • Not dominant strategy but we want to understand the protocol. eBay auctions aren’t in equilibrium.
        • Pedestrian bidding
        • Increase the bid by the minimum bid increment whenever outbid.
    • eBay Proxy Bidding
      • First bidder bids v 1 .
      • Closing price depends on v 2 and d .
      • Integrate over probabilities and revenues.
    • Pedestrian Bidding
      • Auction price increments in steps of d .
      • Equivalent to an English auction with discrete bid levels.
      • m bid levels with value l i .
      where
    • Revenue Comparison eBay Proxy Bidding Pedestrian Bidding Uniform bidders’ valuation distribution [0,1]
    • Revenue Comparison
    • More Than Two Bidders
    • Optimal Bid Increment Uniform [0,1]
    • Optimal Bid Increment Normal N[100,5]
    • Contents
      • Introduction
        • eBay auctions
      • eBay Auction Revenue
        • Proxy bidding
        • Pedestrian bidding
      • eBay Bid History
        • Number of observed bids
        • Bid timing
      • Bidding Strategies
        • Sniping
      • Conclusions
    • Number of Observed Bids
      • Proxy bidding causes the auction price to increase rapidly.
      • Many bidders will not be able to submit a bid.
      • valuation < current auction price + minimum bid increment
      • N bidders attempt to place bids.
      • n bids accepted.
      • How is n related to N ?
    • Number of Observed Bids
      • H N – expected number of times that the second highest bid received so far changes.
      • Add one more bid.
      • Iterative solution.
      • Standard asymptotic approximation.
    • Number of Observed Bids
    • Number of Observed Bids
      • Number of bids accepted << Number of bidders attempting to place bids.
      • eBay bid history is incomplete.
      • Systematic errors when estimating:
        • Bidders valuations.
        • Bidders strategies.
    • Bid Timing
      • eBay auctions are inefficient.
      • Late bidding
        • Increases the probability that bidders can’t submit a bid.
        • valuation < current auction price + minimum bid increment
    • Bid Timing 20 bidders Uniform [0,1]
    • Contents
      • Introduction
        • eBay auctions
      • eBay Auction Revenue
        • Proxy bidding
        • Pedestrian bidding
      • eBay Bid History
        • Number of observed bids
        • Bid timing
      • Bidding Strategies
        • Sniping
      • Conclusions
    • Sniping
      • Last minute bidding.
        • Prevents price wars with incremental bidders.
        • Doesn’t reveal private information.
      • Automated through sniping software.
        • ‘ Bid as late as possible.’
      • But delaying bidding is disadvantageous.
        • Snipe but snipe before the snipers.
    • Contents
      • Introduction
        • eBay auctions
      • eBay Auction Revenue
        • Proxy bidding
        • Pedestrian bidding
      • eBay Bid History
        • Number of observed bids
        • Bid timing
      • Bidding Strategies
        • Sniping
      • Conclusions
    • Conclusions
      • Modelled the eBay auction protocol.
        • Minimum bid increment + proxy bidding system = optimal auction revenue.
        • eBay auction is inefficient.
        • Bid history is incomplete – many hidden bidders.
        • Delaying bidding is disadvantageous.
        • Snipe before the snipers