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Is eBay Trying to Kill Auctions with Make Offer?

http://www.ecommercebytes.com/C/blog/blog.pl?/comments/2017/10/1507693841.html

In the past week, eBay quietly added a “Best Offer” feature to auctions on the site.  This feature was previously only available for non-auction listings with fixed prices and classified ads.  The lack of announcement to sellers about the addition of this new feature is both confusing and infuriating buyers and sellers alike.  The reasoning behind this new feature is for eBay to signal when they believe the starting bid on an auction is too high.  However, as a check on the system, any “Best Offer” is declined if another user bids the starting price on any item.  

 

According to an eBay customer representative, the “Best Offer” button appears only if eBay can deduce that the starting price for an item is overpriced, which is based on selling prices of similar items sold on eBay within the last 90 days.  In addition, the button is both non removable and cannot be added to an auction at the seller’s discretion- it is entirely in the hands of eBay whether or not the “Best Offer” is even an option for a particular auction.

 

Within our study of networks, eBay was listed as a classic example of a straightforward, first price auction.  In this scenario, the dominant strategy is to bid up until you hit your personal value for the object, and the winning bidder pays that price.  However, with the introduction of this new “Best Offer” feature, it gives the option for people with much lower values for items to potentially “win” these auctions in the absence of bidders with higher values for that same object. Essentially, the starting bid on a first price auction of this type is a bid by the seller (the seller’s value for the object), but this new feature would allow individuals to submit bids below the asking prices.  From a purely analytical standpoint and without taking human behavior into consideration, it would never make sense for the seller to accept any “Best Offers” because they would prefer to keep the object.  However, taking human nature into consideration, this new feature could be a way for sellers to more accurately gauge what their real value for the item is, and either sell it to the “Best Offer” suggested or adjust the starting price accordingly.  What they decide to do would depend on what they’ve determined their true value for the object to be- if the offer is at or above their value, they should accept it.  If not, they should change their starting bid to whatever their exact value for the object is.  All in all, this article was an interesting exploration of how human behavior can change the analytical approach to the best strategies in first price auctions as we learned them in class.

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