Cheating on eBay
http://www.bbc.com/news/10494724
It may not seem like a surprise to many that on eBay there are many ways to cheat and act unethically. With so many buyers and sellers on this online market platform, there are bound to be a few people, buyers and sellers, who will resort to unethical methods for higher monetary gain. In this article, it focuses on shill bidding, a widespread tactic in which a seller manipulates the price of his/her item, forcing higher bids. By bidding on his/her own items or having an accomplice do so, it makes the item look more valuable and expensive to buyers.
While in lecture we discussed auctions, I find it interesting to analyze how shilling works in a sealed price online setting. In a closed scenario with few buyers, if everyone only bid up to their true value of the item, the seller could not bid on his/her own item to raise the price considerably. It would be in the buyers’ best interest to leave the auction after true value has been reached to ensure a nonnegative payoff.
But on eBay, the market is extremely large, and not everyone is a smart bidder. With such a large pool of potential buyers, a dishonest seller can bid on his/her own item and still get interested people bidding. A reason for this could be that in an auction this large, the seller is simply finding buyers who have a natural, high true value for the item compared to others. Another scenario could simply be buyers who the seller has forced to bid higher than true value. While this is not the smartest decision nor does it involve a positive payoff, some buyers may be influenced to do so because they had already bid so much prior to the seller’s shilling.
However, the main way shilling seems effective is the way it changes the perception of the item on auction. When the seller dishonestly bids higher on it, a buyer may be inclined to believe that the item is worth more than they previously thought, thus raising his/her true value of the item. Manipulating the buyer’s true value is dangerously effective because a bidder thinks they are still bidding wisely and underneath true value when in reality it is a scam. It is no wonder that eBay spends several million dollars a year to combat shill bidding, protecting its buyers from unethical sellers.