Fading Ebay Auctions
eBay’s identity use to be unique in that it was one of the few sites in the early 2000’s that offered online auctions. However, seldom do we hear of people bidding on eBay anymore. Why is that?
As we’ve learned in class, every auction has a dominant strategy. eBay is an ascending auction. Recall, “These auctions are carried out interactively in real time, with bidders present either physically or electronically. The seller gradually raises the price, bidders drop out until finally only one bidder remains, and that bidder wins the object at this final price. ” (Benson, Easley pg.250) It is the dominant strategy in an ascending auction to bid one true value if the bidder is to get a payoff. However, in reality, bidders are overpaying for items and participating in an auction that is skewing the rules.
https://www.stat.berkeley.edu/~aldous/Research/Ugrad/selene_xu.pdf
According to the study, people experience winning mentality. That is bidders experience utility not only from the difference between their valuation of the item and the actual value of the item, but also from winning. Winning mentality, in turn, motivates bidder to overbid in the future. Thus, eBay bidders are generally not getting a payoff.
The study also argues that bidders valuations are dynamic because they are responding the way in which other people are responding to the product. For example, perhaps a bidder truly values an object a with amount x. However, if they see that multiple people have bid, they now see the product as popular and will alter amount x to some other higher amount. This makes it difficult to have a dominant strategy when bidders don’t have a static value for an item. Again, no payoff.
Furthermore, bidders have an undefined amount of time to bid which kind’ve violates the rule of an auction. The whole premise of an auction is to quickly get rid of an item by gauging people’s valuation of the item. However, in 2008, eBay changed their policy such that auctioneers can extend the period of time at which the item is available by an extra 30 days. There is no urgency and no incentive to bid when time is not relevant.
eBay use to be the Amazon of the 2000’s because it offered a dimension of selling that was not being offered on many other sites. However, the features of Amazon, the mentality of bidders, as well as the valuations of bidders, unfortunately, make it really difficult for you to get a payoff.
https://www.huffingtonpost.com/2013/05/28/ebay-auctions_n_3346307.html