Auctions Prof Sheizaf Rafaeli E-Commerce 1 Auctions

Auctions! Prof. Sheizaf Rafaeli E-Commerce 1

Auctions n Everything is (becoming? ) negotiable. Auctio = increase, ( )יוסף (but not all auctions are about increasing prices!) n n n Auctions are useful for price discovery Auctions are useful to move merchandise quickly Is everything auctionable? E-Commerce, © Sheizaf Rafaeli 2

Auctions A competition-based method of allocating scarce goods. n Often, the auctioneer is not owner but agent. n Rules set by seller, price set by bidder. n Most efficient, purest of markets. n Is it the most fair mechanism? n E-Commerce, © Sheizaf Rafaeli 3

Auctions very popular in B 2 B E-Commerce, © Sheizaf Rafaeli 4

Let’s play the “auction a dollar” game Wanna buy a dollar for a nickel? n Anyone can play. Highest bidder gets it. n Both highest and second highest bidder pay. n Payment to occur online, in view of class. n All bids are public, audible and not sealed, in view of class. n No union, monopoly or “rings” allowed. n TIME IS MONEY! n E-Commerce, © Sheizaf Rafaeli 5

Auction Terminology n n Anonymity - Open (Cry) or Sealed Bid Confidentiality - are participant(s) and winner(s) identities revealed n Secrecy - is inventory Timing - pre-specified closing time, interval, price-determined, etc. Discriminative? - does everyone pay the same price, or what they bid? n n amount disclosed n n n Restrictions Increments Reserve price Internet Auctions Kumar and Feldman IBM Research : http: //www. ibm. com/iac/papers/auction_fp. pdf E-Commerce, © Sheizaf Rafaeli 6

E-Commerce, © Sheizaf Rafaeli 7

Auction Types n n English, Dutch, First-price sealed-bid, Vickrey (uniform second-price sealed bid) Naming problems (in financial community: English is sealed, Dutch is something else) n n 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. E-Commerce, © Sheizaf Rafaeli 8

Auction types - The English Auction Private vs. Common valuation n Audible bids, open outcry, ascending price n reserve price, “knocked down” n Roles of anonymity and experience n E-Commerce, © Sheizaf Rafaeli 9

Auction types: Dutch Auction Descending price n Used to sell flowers and fish, credit, and antiques. n Seller could (due to psychology) more likely receive top price. n Think about auction “frenzy” n E-Commerce, © Sheizaf Rafaeli 10

Auction types: Sealed-Bid (discriminatory) n A bidding period followed by a resolution phase n “Discriminatory” when more than one item sold, at varying prices. E-Commerce, © Sheizaf Rafaeli 11

Auction types: Uniform Second Price n Named for William Vickrey (called “Dutch Auction” in the financial community) n Highest bidder wins, but pays only the price offered by second bidder n Sealing is imperative. E-Commerce, © Sheizaf Rafaeli 12

Auction types: Double Auctions Both bidders and sellers submit “bids”, “asks”. n Has roots in haggling n Offers are ranked. n Double dutch auction runs two sequential clocks. n Probably very attractive when computerized. n E-Commerce, © Sheizaf Rafaeli 13

Other auction types Simultaneous bidding (Japanese) n Haphazard (random) order n Handshake (Chinese) format n Whisper n Candle-light (time-interval) n Silent n Swiss (with regrets!) n E-Commerce, © Sheizaf Rafaeli 14

Auction Collusion and Tricks n According to Fraud. org, online auctions were the #1 source (68%) of complaints in 1998, up from 26% in 1997. E-Commerce, © Sheizaf Rafaeli 15

In 1999, things got worse. . . E-Commerce, © Sheizaf Rafaeli 16

Auction Collusion and Tricks ALL auction types can be manipulated n Serious problem with trust n Hence need for escrow, credit, evaluation and performance data on participants. n Rings, cartels and enforcement n E-Commerce, © Sheizaf Rafaeli 17

Avoiding Fraud in Auctions n Understand how the auction works. n n Check out the seller. Check out buyers and shills. Traceroute? n n Be especially careful if the seller is a private individual. Ask about delivery, returns, warranties and service. n Be wary of claims about collectibles. n Use common sense to guide you. n Pay the safest way. Get a physical address n 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 E-Commerce, © Sheizaf Rafaeli 18

Online Auction trust, ratings and User Profiles E-Commerce, © Sheizaf Rafaeli 19

Auction Strategies E-Commerce, © Sheizaf Rafaeli 20

Try the psychology n Take the Dutch descending auction flower market simulation challenge, at: http: //research. haifa. ac. il/~ avinoy/auction/main. html E-Commerce, © Sheizaf Rafaeli 21

Some other things for auction n Blood, kidneys, wombs E-Commerce, © Sheizaf Rafaeli 22

Auction resources http: //www. internetauctionlist. com/ the internet auction list n http: //www. Auction. Anything. com n http: //www. ebay. com n E-Commerce, © Sheizaf Rafaeli 23

Auction resources Frictionless Commerce My. Simon Bot. Spot Deal. Pilot Nextag. com for haggling E-Commerce, © Sheizaf Rafaeli 24

Israeli auction sites, agents in auctions n http: //www. michraz-Ilmedina. co. il http: //www. 2 bid. co. il n http: //www. netaction. co. il n http: //www. 4 sale. co. il/ n http: //www. vshop. co. il/ n http: //www. 10 bid. com/ n http: //www. priceit. co. il/ n http: //www. olsale. co. il/ n http: //www. rusure. com/ n http: //www. bigdeal. co. il/ n http: //www. salestorm. co. il/ E-Commerce, © Sheizaf Rafaeli 25