AuctionsAuctions

Yunon ChuangYunon Chuang

What are auctions?What are auctions?

Auction Markets:Auction Markets:– traders transact directly against the traders transact directly against the

orders of other traders by orders of other traders by communication through a single communication through a single centralized intermediacycentralized intermediacy

– Public sales to concentrate supply and Public sales to concentrate supply and demand and, discover prices of demand and, discover prices of products and servicesproducts and services

When Auctions SucceedWhen Auctions Succeed

If posted offer and private negotiations If posted offer and private negotiations are inefficient or failare inefficient or fail– The good or service is unique and/or costs The good or service is unique and/or costs

and quality cannot be determinedand quality cannot be determined– There is no shared understanding of attributes There is no shared understanding of attributes

or criteria by which to determine the costor criteria by which to determine the cost– Bargaining costs are high relative to the cost Bargaining costs are high relative to the cost

of the goodof the good– Unique goods where the number of buyers are Unique goods where the number of buyers are

uncertainuncertain

Forms of AuctionsForms of Auctions

English AuctionEnglish Auction Dutch AuctionDutch Auction Offer AuctionOffer Auction Bid auctionBid auction

English AuctionsEnglish Auctions Sequentially increasing bids Sequentially increasing bids

until one active bidder remainsuntil one active bidder remains bidders always know the level bidders always know the level

of the current best bidof the current best bid Used for artwork and some Used for artwork and some

valuable items, such as valuable items, such as Sotheby’s Sotheby’s (http://www.sothebys.com(http://www.sothebys.com), ), and Christie’sand Christie’s (http://www.christies.com)(http://www.christies.com)

Dutch AuctionsDutch Auctions The auctioneer lowers The auctioneer lowers

the offer price the offer price sequentially sequentially (represented by a going (represented by a going clock) until a buyer clock) until a buyer agrees to pay for the agrees to pay for the offer price (set by the offer price (set by the stoppage of the clock).stoppage of the clock).

Bidders have to choose Bidders have to choose how high to bid without how high to bid without knowing the others’ knowing the others’ decisionsdecisions

DutchDutch Auction: Trick of Auction: Trick of gamegame

When the announced price When the announced price progressively lowered, the progressively lowered, the probability of obtaining a gain grow. 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 First Price Sealed Bid AuctionsAuctions

or calledor called Tender Tender Opposite of offer auctionOpposite of offer auction Buyer can make bids sequentiallyBuyer can make bids sequentially sellers can only indicate that a bid sellers can only indicate that a bid

is accepted.is accepted.

Second Price Sealed Bid Second Price Sealed Bid AuctionsAuctions

An institution in which sellers can An institution in which sellers can make offers sequentiallymake offers sequentially

Buyers are able to accept any Buyers are able to accept any offer, but not to make any bidsoffer, but not to make any bids

Auction and Electronic Auction and Electronic commercecommerce

Buyers

One Many

OneNegotiationsusing EDI

Web-basedSales Auction

Sellers

ManyWeb-basedprocurementauctions

Web-basedmany-to-manyauctions

Web CharacteristicsWeb Characteristics------new dimension for auctionsnew dimension for auctions

Lower transaction costsLower transaction costs better reach to potential sellers and better reach to potential sellers and

biddersbidders improving search/find capabilitiesimproving search/find capabilities New auction methods--multidimensional New auction methods--multidimensional

auctionauction– ““Customized auction”: price, item amounts, Customized auction”: price, item amounts,

quality, delivery spec, other contractual specsquality, delivery spec, other contractual specs The usage of intelligent agents-The usage of intelligent agents-

– spidersspiders

Web-based Auction Web-based Auction TheoriesTheories

Multidimensional auctionsMultidimensional auctions Product Presentation and impact of Product Presentation and impact of

multimedia techmultimedia tech Role of quality of web-based public Role of quality of web-based public

or private info in Web-based or private info in Web-based auctionsauctions

Knowledge and Design the Website Knowledge and Design the Website and form of Web-based auctionsand form of Web-based auctions

Electronic AuctionsElectronic Auctions

Expanded ReachExpanded Reach– from co-location to distribution in time or from co-location to distribution in time or

placeplace– access to new customer baseaccess to new customer base

New ways of signaling and sharing New ways of signaling and sharing non-price information (chat, non-price information (chat, messaging, notes)messaging, notes)

New ways of organizing key inter-New ways of organizing key inter-related transaction processesrelated transaction processes

Electronic AuctionsElectronic Auctions

Potential of changing the way Potential of changing the way worth of goods is set by worth of goods is set by transforming valuation and related transforming valuation and related transaction processestransaction processes

Enable new forms of social and Enable new forms of social and other interactionsother interactions

eBay--eBay--www.ebay.comwww.ebay.com English AuctionEnglish Auction More than 1,000 categories of items available for More than 1,000 categories of items available for

bidsbids person-to-person auctions better security: person-to-person auctions better security:

providing built-in safeguards on Word of mouth providing built-in safeguards on Word of mouth counts: seller information page gives positive counts: seller information page gives positive and negative remarks of sellers or biddersand negative remarks of sellers or bidders

Verified user program at $5 fee to ensure Verified user program at $5 fee to ensure everybody traceable and legally accountableeverybody traceable and legally accountable

Real bargains on last-minutes items on Going-Real bargains on last-minutes items on Going-Going-gone pageGoing-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 eBaySelling Rules in eBay RegisterRegister first 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 Selling Rules in eBay (con’t)(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