Online auction on EBay
Online auction on EBay
Everything is moving to the virtual world including trading and purchasing items. We have seen an increase in the number of online auction sites such as DealDash, UniSquare, Trade Me, etc. When it first appeared, EBay quickly became popular among the online shoppers as it offered an online auction platform for all kind of items. This blog post is based on an article titled “An Auction? Most Ebay Users Don’t have Time for That” which can be found at http://www.businessweek.com/articles/2013-05-26/an-auction-most-ebay-users-dont-have-time-for-that.
EBay is of the form first price auction where buyers send in bids and the item is sold to the one with the highest bid. With this format, it is to the buyers’ interest not to bid at their own value but rather bid at a lower one. With this strategy, a bidder has a chance of obtaining positive payoff if they win the bid. In contrast if a user bids at their true value, regardless of whether he wins the bid, he always has zero payoff. This is demonstrated as the article states that auctioned items are sold at “16% below similar items offered at fixed prices”. This is expected as bidding lower but not too much below the true price gives higher chance of winning the item.
The article points out the decrease in online auction on EBay as most sellers choose to set a fixed price for their items. The main reason mentioned is that users do not like to spend their time on an auction but rather have a speedy trade. There can be other reasons behind this fact. Knowing that rational buyers only bid at a price lower than their true value, it is to the sellers’ benefit to set the price at a reasonable price.
In conclusion, on EBay, as a buyer, it is more profitable to participate in the auction section whereas a buyer should research on the value of his item and set a fixed price.
Reference: An Auction? Most Ebay Users Don’t have Time for That
http://www.businessweek.com/articles/2013-05-26/an-auction-most-ebay-users-dont-have-time-for-that