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eBay auctions

Link: https://www.thebalancesmb.com/understanding-the-ebay-auction-automatic-bidding-system-1140186

 

Despite being in the shadow of online retail giants like Amazon, eBay has remained a popular method of buying and selling items through the internet. It has kept its market share by allowing individuals to buy and sell any goods they can imagine in its digital marketplace. The way in which eBay allows its items to be bought and sold adds to its appeal, which is an online version of the classic auction process. The auction allows people to place their bids online based on how they value the item, and each bid must be higher than the previous bid by at least one increment, which is usually around five percent of the current bid. The article explains the process of the ascending bid on eBay, in which people can frantically bid until the timer is up. The highest bidder wins, and pays the second highest price, plus one increment. In auctions like this, continuously bidding until you reach your value is a dominant strategy, as winning ensures you will pay, at most, your own value for the item.

While the classic English bid with a second price payout for the winner isn’t new, eBay has added elements to their auction process that shows a large online-specific evolution of auctioneering. One of the biggest changes to auctioning is eBay’s automatic bidding feature. In this, your dominant strategy is to bid your maximum value of the item. In this system, you can bid your highest value without immediately driving up the price of the auction. When you bid your highest value, rather than show your price, eBay automatically bids one increment higher than the next highest bidder. eBay will continue to do this as long as your bid is higher than the second highest person. This allows you to not need to constantly monitor the auction until expiration, and makes it difficult for people to gauge the current maximum and outbid it by a single increment, especially in the dying seconds of the auction. This brings up another concept specific to eBay auctions. While real auctions continue until one bidder remains, eBay’s have specific time constraints. This allows strategies like immediately placing your maximum value to work, as they won’t immediately be outbid. It adds an element of luck, such as an item flying under the radar for a low price or expiring before someone with a higher bid comes along. It also adds the strategy of “sniping.” This involves people bidding their maximum value in the last seconds of an auction, outbidding previous bidders and not giving them a chance to counter with a higher bid.

This article does well explaining the classic bidding process used in eBay. It also demonstrates a changing landscape in which new strategies are created. Technology allows the automatic bidding feature to add a new element, and a strict timer adds strategies like sniping, along with some chance, to the auction. These differences in eBay auctions aren’t exactly with course material, although many basic concepts align. Most importantly, the dominant strategy of bidding your value, even up to your maximum value, remains constant.

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