Subject:
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Re: Ebay sniper? you make the call
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Newsgroups:
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lugnet.market.theory
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Date:
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Sun, 24 Nov 2002 21:09:58 GMT
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Viewed:
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1502 times
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The problem with ebay is that it is trying to simulate a live auction (as
opposed to a sealed bid auction) on a worldwide basis. Now a normal auction is
held in one place and all the bidders (or their agents) are present throughout
the auction. Everyone is aware what is the current highest bid, and everyone
hears the "going once, going twice" to make a higher bid if they so choose. As
a result, the price goes to the highest possible level given the bidders
present on the day.
But on ebay, we are not all present. We live in different timezones and sleep
for several hours a day, we are all not permanently connected to the Internet.
So, how does ebay end an auction?
We all know the problem with fixed time closing on ebay. It is the direct cause
of sniping. Sniping does not happen in a live auction as any bid extends the
auction. Since the whole point of sniping is to NOT allow another bidder to get
a bid in, it follows that the price does not go as high as it might if that bid
had been allowed. This gives an advantage to the sniper over other bidders and
also disadvantages the seller (who might have got a higher price).
Extending auctions when late bids are received is a partial solution to this.
It reduces the advantage of the sniper over the other bidders *who are watching
the auction live*, but the people able to participate in the auction at the end
still have the advantage over those buyers who submitted a proxy vote and are
not present (asleep, at work, etc). And anything that does not allow all buyers
to react to the current high bid potentially reduces the price to the seller.
To allow all buyers the opportunity to respond, you probably have to allow the
auction to be extended by a day each time (working on the theory that a lot of
people connect to the Internet only once a day). Clearly this has the potential
to drag the auction out, as an auction might go as slowly as a minimium bid
increment each day.
However, I am not convinced it would actually do that. Because just as fixed
time auctions cause sniping, non-fixed time auctions encourage other forms of
behaviour. Specifically it encourages people who really want something to make
a big jump in price to discourage other bidders from trying to compete. So it
forces the price up quite quickly.
Indeed, I theorise that if ebay dropped all concept of closing times for its
auction and simply said, "the auction closes after a period of X-time after the
last bid", then the optimal strategy for the seriously interested buyer is to
bid large quickly, since the auction cannot terminate until they have made
their best bid so prolonging the auction time is not in their interest (it just
allows other new bidders to join in).
This is why I think the ebay "buy it now" mechanism isn't very sensible. To my
mind, the buy-it-now price should remain available throughout the auction, as
it encourages a buyer to make that bid in order to terminate the auction with
them as the winner. Of course, it might be argued that if there is competition,
the price will be driven even higher still. This is true, but the seller had a
choice to set a "buy it now" price or not. In which case, buy-it-now
represents the figure at which the seller is prepared to prematurely terminate
the auction in favour of that buyer.
Alternatively the buy-it-now price should remain available until a "threshold
price" is reached, after which the buy-it-now price ceases to be available.
Like a reserve price, I think a threshold price should be invisible to the
buyers. That encourages the buyer to grab the buy-it-now price quickly as delay
could cause that option to go away.
Of course, with any auction system, the ultimate way to win is to be prepared
to bid more than everyone else. All the sniping in the world doesn't matter if
your proxy bid established on Day 1 is larger than what the sniper is prepared
to pay. So why doesn't this work with ebay? Answer, because people rarely bid
their true maximum. Why is that? Because few of us really know what something
is worth to us until we know how much it is worth to someone else :-) Also, I
think because we are all inherently afraid that there might be shill bidding or
non-paying-buyers bidding and we are reluctant to be pushed to our maximum by
the automatic proxy bidding, without the opportunity of assessing how "genuine"
the competition is.
Kerry
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Message has 1 Reply:
 | | Re: Ebay sniper? you make the call
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| (...) Kerry, That's a really well written analysis. Some problems with open ended bidding: - a day may not be enough - too long an extension results in auctions which do drag out (Serious Collector had this problem as I have mentioned before) I (...) (22 years ago, 25-Nov-02, to lugnet.market.theory)
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Message is in Reply To:
| | Re: Ebay sniper? you make the call
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| (...) If the intent was for everyone to submit bids at the last possible minute, with no opportunity to react to others bids, then they could have chosen a completely standard auction format, the sealed bid auction. In a sealed bid auction, you may (...) (22 years ago, 20-Nov-02, to lugnet.market.theory)
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