Optimal seller strategy in overlapping auctions

Little research has been conducted on a common phenomenon in today's online environment: the concurrent selling of identical products in online auctions. To fill this gap, the current research proposes a game-theoretical model to analyze the seller's optimal strategy for selling two identical items in overlapping auctions. The overlap is modeled endogenously (as the seller's decision), trading off multiple influences including the positive effect on the overlap from bidders' forward-looking behavior and the seller's time discounting, versus the negative impact from bidders' learning and varied demand (i.e., bidder entry). The combined impact of these factors governs the conditions for which a simultaneous, sequential, or partially overlapping strategy is optimal. When the effect of bidders' forward-looking behavior and/or the seller's time discounting dominates, running simultaneous auctions is optimal; when bidders' learning (and bidder entry) dominates, running sequential auctions is optimal. Partially overlapping auctions are optimal when neither effect dominates and the opposing effects are offsetting.     

“To Be or Not to Be an Auctioneer?” Some Thoughts on the Legal Nature of Online “eBay” Auctions and the Protection of Consumers

This paper discusses the legal classification of online “eBay” auctions. The discussion has key implications on the scope of consumer protection law as sale by auctions are, for example, excluded from the scope of the Consumer Protection (Distance Selling) Regulations 2000. The paper uncovers that online “eBay” auctions cannot always be considered as traditional auctions and that eBay, as an intermediary, is not to be considered as an auctioneer. This creates difficulties associated with a distributive application of consumer protection laws such as the Consumer Protection (Distance Selling) Regulations 2000. Another set of difficulties is associated with a lenient legal regime applicable to the liability of eBay under the Electronic Commerce (EC Directive) Regulations 2002. The paper concludes that there is an urgent need to clarify the legal classification of online auctions and to rethink the liability of online auction sites to better protect consumers.

Procurement auctions and negotiations: An empirical comparison

Real-world procurement transactions often involve multiple attributes and multiple vendors. Successful procurement involves vendor selection through appropriate market mechanisms. The advancement of information technologies has enabled different mechanisms to be applied to similar procurement situations. However, advantages and disadvantages of using such mechanisms remain unclear. The presented research compares two types of mechanisms: multi-attribute reverse auctions and multi-attribute multi-bilateral negotiations in e-procurement. Both laboratory and online experiments were carried out to examine their effects on the process, outcomes, and suppliers’ assessment. The results show that in procurement, reverse auctions were more efficient than negotiations in terms of the process. Auctions also led to greater gains for the buyers than negotiations, but the suppliers’ profit was lower in auctions. The buyer and the winning supplier jointly reached more efficient and balanced contracts in negotiations than in auctions. The results also show that the suppliers’ assessment was affected by their outcomes: the winning suppliers had a more positive assessment toward the process, outcomes, and the system. The findings are consistent in both the laboratory and the online settings. Finally, the implications of this study for practitioners and researchers are discussed.     

Competition,Transparency, and Reciprocity: A Comparative Study of Auctions and Negotiations

The paper discusses experiments aimed at comparing multi-attribute reverse auctions and multi-bilateral negotiations for procuring goods with multiple attributes. Both exchange mechanisms involve a buyer purchasing from one of several sellers. Two types of negotiations are considered: verifiable and non-verifiable. They differ in the sellers’ knowledge of the current best offer on the table; in verifiable negotiations the best offer is automatically shown to every participant, which makes it similar to auctions. Online auctions and negotiation systems were used to study auction and negotiation processes, and the mechanisms’ efficiency. The results show that buyers did best using auctions, followed by non-verifiable and verifiable negotiations. We also looked into the differences between auctions and negotiations in terms of their duration, sellers’ and buyers’ involvement, and efficiency and conclude that the behavior of buyers and sellers cannot be explained solely on the grounds of traditional economics. It can, however, be explained on the grounds of social exchange theory and behavioral economics. In multi-bilateral negotiations competition and social behavior coexist. When transparency is introduced the social effect becomes stronger, weakening the impact of competition.     

Nash Equilibrium and Decentralized Negotiation in Auctioning Divisible Resources

We consider the problem of software agents being used as proxies for the procurement of computational and network resources. Mechanisms such as single-good auctions and combinatorial auctions are not applicable for the management of these services, as assigning an entire resource to a single agent is often undesirable and appropriate bund sizes are difficult to determine. We investigate a divisible auction that is proportionally fair. By introducing the notion of price and demand functions that characterize optimal response functions of the bidders, we are able to prove that this mechanism has a unique Nash equilibrium for an arbitrary number of agents with heterogeneous quasilinear utilities. We also describe decentralized negotiation strategies which, with approrpate relaxation, converge locally to the equilibrium point. Given an agent with a sequence of jobs, we show how our analysis holds for a wide variety of objectives.     

A comparison of different pay-per-bid auction formats

Pay-per-bid auctions are a popular new type of Internet auction that is unique because a fee is charged for each bid that is placed. This paper uses a theoretical model and three large empirical data sets with 44,614 ascending and 1,460 descending pay-per-bid auctions to compare the economic effects of different pay-per-bid auction formats, such as different price increments and ascending versus descending auctions. The theoretical model suggests revenue equivalence between different price increments and descending and ascending auctions. The empirical results, however, refute the theoretical predictions: ascending auctions with smaller price increments yield, on average, higher revenues per auction than ascending auctions with higher price increments, but their revenues vary much more strongly. On average, ascending auctions yield higher revenues per auction than descending auctions, but results differ strongly across product categories. Additionally, revenues per ascending auction also vary much more strongly.     

Revenue implication of auction value in <Emphasis Type="Italic">k</Emphasis>-price sealed-bid auctions: An experimental study

In this paper, we show that in a heterogeneous bidding community with predominantly risk-seeking bidders, third-price sealed-bid auctions yield higher revenue for the seller than first-price sealed-bid auctions when the auction value is low. Conversely, when the value of the auction is high, first-price sealed-bid auctions yield higher revenue for the seller than third-price sealed-bid auctions. Existing theoretical findings for a homogeneous group of risk-seeking individuals imply that third-price sealed-bid auctions should generate higher revenues for the seller than first-price sealed-bid auctions. Our results for low-value auctions agree but our results for high-value auctions do not agree with the existing findings. We discuss the implications of this discrepancy as a function of the shift in goal orientation from a win-focus to a value-focus as the value of the auction increases.

Competition between auctions

Even though auctions are capturing an increasing share of commerce, they are typically treated in the theoretical economics literature as isolated. That is, an auction is typically treated as a single seller facing multiple buyers or as a single buyer facing multiple sellers. In this paper, we review the state of the art of competition between auctions. We consider three different types of competition: competition between auctions, competition between formats, and competition between auctioneers vying for auction traffic. We highlight the newest experimental, statistical, and analytical methods in the analysis of competition between auctions.     

How to Coordinate Value Generation in Service Networks

The fundamental paradigm shift from traditional value chains to agile service value networks implies new economic and organizational challenges. As coordination mechanisms, auctions have proven to perform quite well in situations where intangible and heterogeneous goods are traded. Nevertheless, traditional approaches in the area of multidimensional combinatorial auctions are not quite suitable to enable the trade of composite services. A flawless service execution and therefore the requester’s valuation highly depends on the accurate sequence of the functional parts of the composition, meaning that in contrary to service bundles, composite services only generate value through a valid order of their components. The authors present an abstract model as a formalization of service value networks. The model comprehends a graph-based mechanism implementation to allocate multidimensional service offers within the network, to impose penalties for non-performance and to determine prices for complex services. The mechanism and the bidding language support various types of QoS attributes and their (semantic) aggregation. It is analytically shown that this variant is incentive compatible with respect to all dimensions of the service offer (quality and price). Based on these results, the authors numerically analyze strategic behavior of participating service providers regarding possible collusion strategies.     

When auction meets fixed price: a theoretical and empirical examination of buy-it-now auctions

Recently fixed pricing and auctions have been brought together in a new pricing format that offers bidders the option of prematurely ending an auction at a fixed price. The growing popularity of auctions presents an interesting pricing decision for managers: whether to sell at a fixed price, in a regular auction, or through a buy-it-now auction. This paper studies eBay’s buy-it-now auction and answers the following research questions: why is fixed price used at traditional auctions, will buy-it-now increase the seller’s profit, how is an optimal price determined, and how is the buy-it-now decision influenced by key factors such as the customer’s cost of participating in the auction, the seller’s reserve price, and the number of potential customers. Our results show that when customers make endogenous participation decisions according to their participation costs, buy-it-now auctions can increase both customers’ utility and sellers’ profit. Endogenous participation has important implications for seller’s pricing decisions such as price formats and levels. Depending on the level of the posted price, the resulting price format could be either fixed price, buy-it-now auction or pure auction. Therefore, the seller needs to be careful and take into account market conditions when posting a price at auctions. We empirically test the model assumptions and predictions using data collected from eBay.

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The impact of jump bidding in online auctions

This paper reports findings of two field studies, conducted on a local online auction website, that compare bidding strategies in charity and non-charity auctions, focusing on the extent of jump bidding at different stages of auctions. Results indicate that jump bidding is negatively correlated with bidder entry and positively associated with ending prices. These correlations are greatest during the beginning stage of auctions and are substantially larger for charity auctions than for non-charity auctions. Additionally, early-stage jump bidding occurred more often in charity auctions (consistent with bidders trying to drive up prices in charity auctions), ending-stage jump bidding was more frequent in non-charity auctions (possibly used strategically to win the auction). Further, frivolous products tended to sell at a higher proportion of retail value in charity auctions, providing a replication of the results of previous researchers but in a field setting.     

Product classifications,consumer characteristics,and patronage preference for online auction

An important unanswered question in the area of Internet auctions is what dynamics influences consumer preferences for shopping on these online auctions. Two key aspects of studying what sells on the Internet auctions are (a) the characteristics of products to be purchased and (b) consumer characteristics. This research focuses on the relationship between product purchase preference, prior experience, and socioeconomic characteristics for the online auction participants. It uses product classification theory rooted in information economics and marketing. The study results are based on a US national sample of online auction participants. The findings suggest that product class affects online auction patronage, yet socioeconomic characteristics may not be as influential as once perceived. The online merchants can benefit from the inquiry to improve auctions for search, experience, and credence goods. The five key contributions of the findings add value to the theory and practice of consumer behavior.     

认知型飞蜂窝网络中的子信道分配与功率控制

为了解决宏蜂窝与飞蜂窝构成的两层异构网络上行干扰与资源分配问题,提出了一种在认知型飞蜂窝的双层异构网中结合子信道分配和功率控制进行资源分配的框架。通过对异构网中跨层干扰问题进行分析与建模,将求解最优子信道分配矩阵和用户发射功率矩阵作为干扰管理问题的解决方法。模型中认知型飞蜂窝网络子信道和飞蜂窝网络用户构成非合作博弈,双方利用效用函数最优值进行匹配,构成初始信道分配矩阵;再由接入控制器根据接入条件从初始信道分配矩阵中筛选用户,并优化接入用户的发射功率矩阵,得到最优子信道分配矩阵和功率矩阵。仿真结果表明,优化框架提高了双层异构网络中飞蜂窝网络用户的吞吐量和接入率,降低了异构网中跨层干扰。     

Agent-Based Reallocation Problem on Social Networks

Resource reallocation problems aim to determine an allocation maximizing a given objective function. Numerous applications are based on the assumption of restricted contacts between entities but, up to now, studies have been based on unrealistic contexts. Indeed, most of the time, agents are omniscient and/or have complete communication abilities, which are not plausible assumptions in many applications. A solution does not only consist in an optimal allocation, but in a sequence of transactions changing an initial allocation into an optimal solution. We show that the individual rationality does not allow the achievement of socially optimal allocations, and we propose a more suitable criterion: the sociability. Our method provides a sequence of transactions leading to an optimal allocation, with any restriction on agents’ communication abilities. Provided solutions can be viewed as emergent phenomena.     

Ascending Combinatorial Auctions with Risk Averse Bidders

Ascending combinatorial auctions are being used in an increasing number of spectrum sales worldwide, as well as in other multi-item markets in procurement and logistics. Much research has focused on pricing and payment rules in such ascending auctions. However, recent game-theoretical research has shown that such auctions can even lead to inefficient perfect Bayesian equilibria with risk-neutral bidders. There is a fundamental free-rider problem without a simple solution, raising the question whether ascending combinatorial auctions can be expected to be efficient in the field. Risk aversion is arguably a significant driver of bidding behavior in high-stakes auctions. We analyze the impact of risk aversion on equilibrium bidding strategies and efficiency in a threshold problem with one global and several local bidders. Due to the underlying free-rider problem, the impact of risk-aversion on equilibrium bidding strategies of local bidders is not obvious. We characterize the necessary and sufficient conditions for the perfect Bayesian equilibria of the ascending auction mechanism to have the local bidders to drop at the reserve price. Interestingly, in spite of the free-riding opportunities of local bidders, risk-aversion reduces the scope of the non-bidding equilibrium. The results help explain the high efficiency of ascending combinatorial auctions observed in the lab.     

Bidder motives in cause-related auctions

We study cause-related auctions where a percentage of the dynamically determined purchase price of an item is donated to charity. Little is known about the effectiveness of such auctions. Bidders who value donations to charity have an incentive to bid more aggressively in such auctions. Regardless of whether they win or not, these bidders can significantly affect prices. The purpose of this paper is to study bidders' willingness to pay a premium in charity auctions and the drivers that affect the charity premium. We use a carefully designed field experiment involving simultaneous pairs of auctions that are identical in all respects but percentage of the proceeds donated to charity. This design gives us the ability to look at bidder choice among auctions based on charitable considerations. We use a mixture model approach to allow for different types of individual preferences. We find that individuals fall into three segments: two altruistic segments and a selfish segment. The altruistic segments, which drive up the charity premium, can be classified as warm glow bidders who derive pleasure from the act of giving and other-regarding bidders who give for selfless reasons. Results show that the difference in donation percentages is the major factor influencing the charitable premium. However, bidders differ considerably in their responses to donation percentages. While other-regarding bidders tend to seek auctions where a greater percentage of revenue is donated to charity, warm glow bidders only contribute when the charity premium is sufficiently low. Thus, managers should focus their marketing efforts on appealing to these different segments, depending on the percentage donated to charity.     

Auction Fever! How Time Pressure and Social Competition Affect Bidders’ Arousal and Bids in Retail Auctions

Auction sites on the Internet frequently put bidders under time pressure or highlight the social competition that is inherent to auctions. Both aspects are believed to elicit an exciting shopping experience, which may culminate in auction fever. In two laboratory experiments, we investigate the process of auction fever in retail auctions and demonstrate when and how auction fever affects bidding behavior. In contrast to previous studies, we employ physiological measurements as an objective and continuous assessment of bidders’ arousal in addition to a subjective assessment of bidders’ emotions through psychometric scales. Moreover, we explicitly study the interaction of time pressure and social competition on arousal and bids. We find that bidders’ arousal is increased in high time pressure auctions and that this leads to higher bids in ascending auctions—but only when bidders compete with human opponents. Thus, social competition is the actual driver underlying the auction fever phenomenon. Furthermore, we show that the “joy of winning” is significantly stronger than the “frustration of losing” in ascending auctions. Finally, we discuss the implications of our findings for the design of retail auctions.     

The effect of liquidity constraints on futures hedging

This article assumes that because of liquidity constraints, a hedge program will be terminated if the cumulative loss from a futures position exceeds a certain threshold. The constraint leads to a smaller futures position. If the hedger has a quadratic utility function, then the optimal futures position is constant regardless of the parameter values and increases as the spot position or the conventional hedge ratio increases. When the capital allocation is small, the hedger tends to ignore this restriction and chooses a larger position. Consequently, the optimal position may decrease as the capital allocation increases. For a moderate capital allocation, the optimal position increases with an increasing capital allocation. Similar properties are established for exponential utility functions. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:603–613, 2003     

Experts and Amateurs: The Role of Experience in Internet Auctions

The use of auctions as a pricing mechanism has grown dramatically over the last few years. The introduction of electronic auctions has significantly widened the pool of consumers who participate in auctions and increased the number of companies attempting to sell their products in an auction format. Previous empirical research on auctions has focused almost exclusively on the behavior of professional bidders in high stakes common value auctions or the behavior of students in laboratory experiments. We collect data on a large number of electronic auctions, across four product categories, to explore the behavior of consumers bidding in a real marketplace. In particular, we focus on the role experience plays in their bidding behavior to uncover whether consumer learning drives the bidding process towards outcomes described in the theoretical literature on auctions. We find that experience does indeed lead to behavior which is more consistent with theory although the proportion of experienced bidders who behave in a manner inconsistent with theory remains quite large.     

A Generalized Cameron–Martin Formula with Applications to Partially Observed Dynamic Portfolio Optimization

The optimal dynamic allocation problem for a Bayesian investor is addressed when the stock's drift—modeled as a linear mean-reverting diffusion—is not observed directly but only via the measurement process. Adopting a martingale approach, an appropriate generalization of the Cameron–Martin (1945) formula then enables computation of both the optimal dynamic allocation and the value function for a general utility function, in terms of an inverse Laplace transform of an explicit expression. Moreover, closed-form formulas are provided in the case of power utility.