The Trajectory of Auctions in E-Commerce
Recent decades have allowed for an advent of technology and instruments that now highly influence the strategies and networks one can engage in. Cryptocurrency, in particular, continues to play a focal role in this new trading field. We see that it has reinforced and popularized the usage of second price auctions, a principle often associated with Google. This practice enables the buyers to bid truthfully (as they would only have to pay the second-highest bid value). The continued usage of second price auctions in virtual environments has virtually (yet, informally) declared it the primary form for online ad auctions, even with retail mogul Walmart now resorting to this auction type.
However, some may argue that second price auctions may be more deceitful than their counterparts. There is a looming concern of cunning tactics that can undermine the transparency of an exchange: shill bidding allows for “phantom bids” that inflate values and collusions among bidders can result in unfair wins. An irony lies in that though bids are not as truthful in first price auctions, sellers cannot manipulate the clearing price by setting a floor (as Rosen argues). That is, the auction seller will receive the highest bid without reduction and therefore does not need to account as heavily for aggressive bidding strategies from buyers. By this logic, it may be possible that first price auctions can simplify an auction process in the e-commerce world.
Although I do not expect auction types to change any time soon in the ad auction environment, the general volatility of virtual trade and profit makes me question which trajectory these digital auctions will take.