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Are eBay auctions efficient? A model with buyer entries

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  • Huang, Ching-I

Abstract

I use a sequential-auction model to mimic the environment of Internet auction sites, such as eBay. For a sequence of auctions, new buyers may enter the auction site after some of the auctions has completed and only bid for the remaining auctions. Because an incumbent buyer may have revealed their own valuation in earlier auctions while a new entrant do not, their expectations about the future are asymmetric. As a result, a buyer with a lower valuation may win an auction while a buyer with a higher valuation may restrain from bidding higher, resulting an inefficient allocation. On the contrary, selling the multiple items in a single simultaneous auction results in an efficient outcome. The profit from selling all items together in one simultaneous auction is less than that from selling them sequentially.

Suggested Citation

  • Huang, Ching-I, 2008. "Are eBay auctions efficient? A model with buyer entries," MPRA Paper 7754, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:7754
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    References listed on IDEAS

    as
    1. Patrick Bajari & Ali Hortaçsu, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June.
    2. Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer.
    3. Axel Ockenfels & David Reiley & Abdolkarim Sadrieh, 2006. "Online Auctions," NBER Working Papers 12785, National Bureau of Economic Research, Inc.
    4. Robert J. Weber, 1981. "Multiple-Object Auctions," Discussion Papers 496, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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    More about this item

    Keywords

    Internet auction; sequential auctions; affiliated private values;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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