Auctions on the Internet
There are a myriad ways in which this new era, where the Internet exists, has changed the relationship between buyers and sellers. From personalized and specialized advertisements to fast-paced deliveries. Every buyer now has ease of access to whatever desired product they wish to purchase. Due to sellers having to pay commission and a fee to sell their products, initial prices are going to be raised in response. Buyers will then have less options to choose lower priced items, and may end up having to bid over their intended bids to have any chance at winning auctions and receiving the item. The article explains how online auctions are no longer simply a buyer-seller relationship, but now there are multiple sellers for a buyer to choose from and each one has multiple buyers to compete against. Even though this article is also about increasing revenue for the sellers, it does bring up some interesting factors in online auctions that may affect how the strategy of bidders may change.
Increasing prices does not mean increasing bidders’ true values, but it may make it harder for buyers to maximize payoff in first-price auctions. The best strategy of paying lower than a bidder’s true value may not maximize payoff in the same way since the higher prices put more pressure on other bidders to win. If the price starts very close to a bidder’s true value, bidding lower than their true value might be a poor strategy since they will be more likely to lose as the price rises from other bids. Though we have only gone over the basics of auctions in class, it is interesting to note how many variables might affect auctions. However, the buyer, in this case, will still want to spend only the amount of money that leads to greater payoffs. I do wonder whether there are new factors introduced by online auctions that influences how much a buyer is willing to bid. In the article, they mentioned that people might wait to purchase things until they find a satisfactory price if there is no urgency, but that only changes the timeline of an auction, not the strategies used by buyers. We all may have a general sense of how much an item is worth to us, but it may be that the ability to buy something with the click of a mouse may significantly decrease the payoffs we might have originally aimed for. It may feel less like real money and more like a game, where you can win by bidding higher, and you are much more willing. Needless to say, introducing the online factor can easily change the way buyers and sellers value products.
https://insight.kellogg.northwestern.edu/article/increasing_revenue_from_online_auctions