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Microsoft PowerPoint - Presentation10.16.07 [Compatibility Mode]

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  • 1. Snipers, Shills, and Sharks Ken Steiglitz Princeton University Pi t U i it Press, 2007
  • 2. Find the treasure!
  • 3. A bronze coin from Tyre, Phoenicia, under the reign of Valerian I, 253-260 AD. Dido stands left holding sceptre and cubit rule; to the left a mason working on the top of a gateway, below a man digging with a pick.
  • 4. Neapolis, Samaria, Mt. Gerazim, supported by eagle, under Trebonius Gallus, 251-3 AD ,
  • 5. Gaba, Trachonitis, Coele-Syria, Ant. Pius, 138-161 AD, tetrastyle temple with three arches above, within, turreted city goddess wearing long chiton, hldg. long standard in r. hand, cornucopiae in left, crowned by Nike on pedestal to r ; in ex : ΓABHNωN r.; ex.: ΓABHNωN,
  • 6. The nineteenth-century art expert Edmond Bonnaffe’ nineteenth- is i reported t have observed th t t d to h b d that "after Michelangelo s pictures and the Medici porcelain after Michelangelo's the rarest thing he had ever seen among collectors was goodwill, and he drew the conclusion that collectors‘ mania embraced the desire to own things for oneself oneself, the desire to own them for others, and the desire to stop other people owning anything." M. Rheims, "The Strange Life of Objects: 35 Centuries of Art Collecting", Atheneum Publishers, New York, 1961, (Translated from the French by D. Pryce-Jones) D Pryce-
  • 7. Three questions, three levels questions • Why is eBay so successful? • What is th received th Wh t i the i d theory of auctions? f ti ? • How well does the theory work in p predicting human behavior? g
  • 8. Why is eBay so successful? • The mechanism: Not the most obvious way to run an online auction! 1) Winner pays second-highest bid second- 2) At any point, next-highest bid is posted next- 3) Bidding ends at a fixed time ) g
  • 9. A trusted third party • Transparency engenders trust and can trust… invite interlopers: eBay treads the line • Recent compromises: bidder ID’s • 1) anonymized after bids reach $200 • 2) can no longer search by bidder for ) g y active auctions
  • 10. Theoretical roots: William Vickrey • 1961 paper proposes 2nd-price auctions, now called “Vickrey auctions” Wins Nobel prize 1996
  • 11. Plus John Nash • Equilibrium behavior: translates human behavior to a mathematical condition • Bidding one’s private value i d i l is dominant Wins Nobel prize, 1994
  • 12. The lay of the theoretical land Vickrey 1961 IPV first− and second−price fi t d d i symmetric bidders REVENUE EQUIVALENT Riley Samuelson 1981 Ril & S l large class, reserve symmetric bidders Myerson 1981 optimal, not efficient asymmetric bidders Milgrom & Weber 1982 affiliated values revenue ranking, but only with symmetric bidders
  • 13. Most naïve theory • Bid your private value • Sit back and relax… • I this context, eBay is a Vickrey auction In thi t t B i Vi k ti This is eBay’s “proxy bidding” Hopelessly naïve
  • 14. Early bidding vs Sniping vs. AR DENARIUS, HADRIAN, Aequitas • But early bidding 80 affects behavior 2 3 70 3 2 3 60 3 3 3 bid in dollars 2 3 50 3 d WAR 40 2 3 30 3 2 3 3 20 2 1 bids $13.02 early 10 145 150 155 160 165 170 time in hours
  • 15. Dangers of early bidding con’t bidding, con t Nerva 96-98AD Ae As 50 451 2 40 2 2 2 bid in Australi dollars 35 2 2 30 2 As bait ian 2 2 25 20 15 d 10 5 0 140 150 160 170 180 190 200 time in hours
  • 16. Dangers of early bidding con’t bidding, con t Hadrian, Alexandria, Athribites nome 160 Reserve @ $150 4 140 1 1 1 1 120 3 1 100 1 Curiosity bid in dollars 80 1 d 1 3 60 1 1 1 401 2 1 1 1 201 1 1 0 0 20 40 60 80 100 120 140 160 180 time in hours
  • 17. The internet as a laboratory a goldmine of data ld i fd • Empirical studies are proliferating • They augment laboratory experiments • They augment theory • Typical studies: 1) Hossain & Morgan 2003: Test of revenue equivalence 2) Katkar & Lucking-Reiley 2000: Is a secret Lucking- reserve a good idea?
  • 18. General conclusions: very b i economics basic i • Buyers should try to decrease competition: bid late, lay low, hide expertise; i.e., snipe • Sellers should try to increase competition: use y p low opening bids, avoid secret reserves if possible, be nice to buyers! • eBay’s interests generally align with sellers
  • 19. Some recent empirical results • Bidders snipe more often on collectibles -- more incentive to hide interest and p expertise • Buyers tend to overlook somewhat higher shipping costs pp g • Bidders tend to avoid items with secret reserves • Bidders tend to prefer auctions with many bidders (herding behavior) ( g )
  • 20. The dark side • Shills • Shadowing bidders • Exporting and i E ti d importing cultural artifacts ti lt l tif t • Fakes • Rings (bidder collusion)?
  • 21. A (likely) shill Item title: Webster Peter Rabbit Youth Set 100 Reserve = $95 ______ 2 3 • Bidder 3 bids 90 2 $94 when the 80 2 1 reserve is 70 $95 and the 60 bid in dollars high bid is n 50 2 1 below that. 40 2 1 She has 30 2 1 feedback f f db k of 20 2 1. A likely 10 shill. shill 0 80 90 100 110 120 130 140 150 160 170 time in hours