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The Dynamic Bidding Structure of eBay

eBay, Inc. is a massive e-commerce company that provides a unique customer to customer and business to customer salves services using the Internet. The major function of the company’s website is as an online shopping experience that utilizes a unique online auction system to allow businesses and people to sell and buy a broad variety of goods.

An interesting analysis of the auction structure of eBay was conducted by Ilke Onur in 2010, and a link to the journal article is provided here (will need NetID login):

http://apps.webofknowledge.com.proxy.library.cornell.edu/full_record.do?product=WOS&search_mode=GeneralSearch&qid=1&SID=3E44qMXgx8mPomNMewr&page=1&doc=3

In this article, Onur describes the dynamic nature of eBay auctions, and how the power of the Internet and cost-less searching transforms the bidder’s search for an item into a multimodal survey of several simultaneous auctions. Indeed, one of the most powerful aspects of eBay is the ability of the consumer to “search” for relevant auctions, allowing the bidder to determine which course of action is most applicable to him or her.

In general, most eBay auctions are ascending, first price auctions, where the duration of the auction is generated by the seller. The system generally uses a proxy bidding system to allow bidders to submit a price, which is then utilized by the website to increment the current bid accordingly. The amount of information available to the bidder is also slightly different than that discussed in class: the highest-standing bid, time left for the auction to close, starting and ending time of the auction, location of the item, and a plethora of other details are all available to the bidder, which may have a major impact on the bidder’s valuation of the item under consideration. The example analysis used in this article was a survey of the TI-83 graphic calculator, and a search result for this item on eBay is linked below:

http://www.ebay.com/sch/i.html?_from=R40&_trksid=p2050601.m570.l1313.TR11.TRC1.A0.H0.Xti-83&_nkw=ti-83&_sacat=0

In addition, eBay has implemented a unique “Buy-it-Now” feature, which allows bidders to essentially leave the auction setting and enter the matching market setting, assuming no other buyers have already purchased the item. This adds yet another layer of complexity to the auction system offered by eBay; eBay users have a unique set of opportunities to find the item of their choice at their true value, mainly due to the high volume of sellers that are simultaneously selling similar items.

Ultimately, the system offered by eBay provides a unique mix of the search engine functions offered through the Internet in combination with a unique auction/matching market structure. This leads to a massively successful e-commerce system that allows bidders to find their items and compete for them in a much more dynamic and expansive setting than conventional auction systems.

Reference:

Onur, I. (2010). Bidding behavior in dynamic auction settings: An empirical analysis of eBay. Electronic Commerce Research and Applications, 9(2), 103-110.

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