Pricefalls.com: EBay in Reverse. Ascending Bid vs. Descending Bid
Pricefalls.com is a new auctioning website that may become more successful than EBay. EBay uses the ascending auction type, where the seller sets a minimum price and people bid against each other until the time runs out. Pricefalls uses a descending auction (also known as a Dutch auction). Buyers set their “if it hits” price, which is hidden to all other buyers. Sellers set a “catch it now” price, which is equivalent to EBay’s “buy it now”. Buyers can purchase the product at this price at anytime. Product prices continuously fall until it reaches a buyer’s “if it hits” price or it reaches the seller’s price floor. Once the item reaches the price floor it is taken off the market. In essence, the seller lists their ideal price, and watches the price fall until it reaches a buyer’s bid. This site was actually designed by a college student. “Basically, we work like EBay in reverse” says 23-year-old CEO Elliot Moskow from Bates College. Moskow thinks consumers will benefit from this new and unique shopping experience. Additionally, merchants have full price control. Buyers don’t know when the auction is going to end, and as soon is the price falls to the highest bid, the item is sold at that price to the respective bidder. Unlike EBay, no buyer can come in and “steal” the item right as the auction is over.
As stated in lecture, a dominant strategy for an ascending bid auction is to stay in until your maximum value has been reached. However, for a descending auction, the dominant strategy is to bid your value. This makes it much simpler for consumers to participate in auctions. Buyers don’t have to sit by the computer in a bidding war; they can simply just set the price they’re willing to pay.
Links:
http://www.ecommercebytes.com/cab/abu/y211/m11/abu0298/s02
http://www.families.com/blog/new-online-auction-site-pricefallscom
http://www.godatafeed.com/blog/meet-a-new-face-in-marketplaces-pricefalls-com/