eBay & Its Hidden Gem
eBay, an online shopping site that is best known for its auctions and its consumer to consumer sales. eBay is also extremely popular for online merchants that use the site as its sales channel. In its early years, eBay was known as AuctionWeb (1995) because it was initially an online platform with the sole function of running second-priced bidding auctions.
According to Bloomberg, the online auction system is fading fast. “Fewer than 15 percent of all who post eBay listings are opting for an auction-only sale these days. Most sellers instead choose to offer items at fixed, “Buy It Now” prices, making eBay more like a conventional e-commerce website than the online-auction pioneer it was in the 1990s.” Thus, I decided to dig into what used to make eBay special; what made it different from Amazon, the biggest online selling platform today.
One thing I realized, is that eBay has a really weird auction-style called proxy bidding, which is similar to a sealed-bid auction given:
- The winning bidder pays the second-highest bid + one bid increment amount. (However, one will come to a realization that the bid increments are significantly smaller than the bid itself, and it rarely affects the dominant strategy of bidding your true value like in a second-priced auction.
- The highest bidder’s bid is sealed (in other words, hidden), whereas the winning bid (second price + bid increment) is displayed on the eBay platform (letting other interested buyers know the “possible” price).
- It is to the bidders’ advantage to make their bids only at the very end of the auction, because early bids will increase the final winning price of the item instead.
I think this system of bidding is really interesting and can be seen put into use on other platforms. However, I was still wondering what the dominant strategy for proxy bidding is, and it might be an interesting thing to learn about.