Modelling concurrency of events in on‐line auctions via spatiotemporal semiparametric models

Summary. We introduce a semiparametric approach for modelling the effect of concurrent events on an outcome of interest. Concurrency manifests itself as temporal and spatial dependences. By temporal dependence we mean the effect of an event in the past. Modelling this effect is challenging since events arrive at irregularly spaced time intervals. For the spatial part we use an abstract notion of ‘feature space’ to conceptualize distances among a set of item features. We motivate our model in the context of on‐line auctions by modelling the effect of concurrent auctions on an auction's price. Our concurrency model consists of three components: a transaction‐related component that accounts for auction design and bidding competition, a spatial component that takes into account similarity between item features and a temporal component that accounts for recently closed auctions. To construct each of these we borrow ideas from spatial and mixed model methodology. The power of this model is illustrated on a large and diverse set of laptop auctions on eBay.com. We show that our model results in superior predictive performance compared with a set of competitor models. The model also allows for new insight into the factors that drive price in on‐line auctions and their relationship to bidding competition, auction design, product variety and temporal learning effects.