Contrast effects in online auctions

Prior research has shown online auction features can serve as information cues and affect consumers’ willingness-to-pay. We argue that auctions are not only affected by their information cues but also by contrasting, peripheral information cues from adjacent auction listings. Applying contrast effects theory, we examined the moderating effects of time urgency and persuasion intent on the processing of contrasting peripheral information from adjacent auctions. Using two controlled experiments and an empirical field study, we showed that time urgency experienced by bidders in online auctions resulted in increased heuristic processing of contrasting information from adjacent auction listings. Under time pressure, bidders were more likely to be affected by this contrasting peripheral information. We also found that bidders will discount contrasting peripheral information if they perceive salient persuasion intents in advertising presented by the auctioneers. The resulting contrast effects ultimately lead to changes in willingness-to-pay and underscore the importance of peripheral information from adjacent auctions in impacting auction outcomes.     

Should we collude? Analyzing the benefits of bidder cooperation in online group-buying auctions

Cooperation among bidders in traditional auctions is typically forbidden. This is because it is viewed as being harmful to the interests of sellers, who hope to obtain fair prices for their sale items. It also may be harmful to other bidders who are not able to take advantage of any cooperation that is occurring. In online group-buying auctions, in contrast to traditional auctions, cooperation results in higher welfare, leading to market expansion that benefits buyers and sellers, as well as the auction intermediary. This has not been well understood in prior research, however. In this article, we show how the online group-buying auction mechanism on the Internet can be effectively enhanced to produce higher welfare for the participants. The key to achieving this, we find, is for the auction intermediary to provide a means for bidders to cooperate, so as to collectively express greater demand. Such cooperation, it turns out, permits the group-buying auction mechanism to dominate the fixed-price mechanism from the seller’s point of view under some circumstances. Through an analytical modeling analysis, we offer insights into how sellers can set their group-buying auction price curves more effectively, so as to take advantage of bidder cooperation to improve auction performance. We further argue that the goal of the auction intermediary should be to offer an information sharing mechanism to facilitate bidding ring formation, as a means to maximize the value of this market mechanism.     

Design of online auctions: Proxy versus non-proxy settings

Recent years have witnessed the rapid development of online auctions. Currently, some online auctions, such as eBay, introduce a proxy bidding policy, under which bidders submit their maximum bids and delegate to a proxy agent to automatically outbid other competitors for the top bidder, whereas other online auctions do not. This paper compares these two widely used auction mechanisms (proxy setting and non-proxy setting) and characterizes the equilibrium bidding behavior and the seller's expected revenue. We find the proxy auction outperforms the non-proxy auction in terms of the seller's expected revenue. This dominance result is not prone to the specific bid announcement policy, the bidder's knowledge regarding the number of bidders, the impact of traffic congestion along the bidding process, the number of items sold through the auction, and the existence of a reserve price.We further find that the proxy setting usually fails to sustain the truthful bidding as a dominant strategy equilibrium even if no minimum bid increments are adopted, and the possibility of a low-valuation-bidder dilemma where the low-valuation bidders could be better off if all bidders collude to bid at the last minute. We also discuss the dramatically different equilibrium bidding behaviors under the two auction mechanisms.     

Bidder-anonymous English auction scheme with privacy and public verifiability

This work studies the English auction protocol, which comprises three interactive parties—the Registration Manager, the Auction Manager and the Bidder. The registration manager confirms and authenticates the identities of bidders; the auction manager issues the bidding rights and maintains order in holding the auction. The proposed scheme provides the following security features—anonymity, traceability, no framing, unforgeability, non-repudiation, fairness, public verifiability, non-linkability among various auction rounds, linkability within a single auction round, bidding efficiency, single registration, and easy revocation. The scheme developed herein can effectively reduce the load on the registration and auction managers by requiring the end server to derive the key. It also eliminates the need for bidders to download the auction key and the auction certificate. Hence, the time complexity of processing data is clearly reduced and the best interests of the bidders can be achieved. Accordingly, the scheme is consistent with the actual practice of online transactions.     

Efficient anonymous auction protocols with freewheeling bids

The need for electronic auction services has been increasing in recent years. Taking security into account, anonymity of online bidders becomes more important than it used to be. However, bidders cannot bid of his/her free will in existing anonymous auction protocols. For real-time applications, time delays are the significant factor taken into account. As a result, the proposed paper presents a simple and efficient method to ensure that the bidders can bid arbitrarily and anonymously.     

Reactivity based model to study online auctions dynamics

Online auctions have challenged many assumptions and results from the traditional economic auction theory. Observed bidder behavior in online auctions often deviates from equilibrium strategies postulated by economic theory. In this research, we consider an online auction as an information system that provides a long-duration, information-rich, dynamic application environment in which users (bidders) interact with the system in a feedback loop, in what we term reactivity. Bidders react to the observed conditions of the auction and events triggered by actions of other bidders. In this work we propose a new characterization model with the purpose of isolating the segments of the auction in which users react to the auction conditions and events. Through this model, it is possible to enrich the auction characterization. Despite the existence of other bidding characterization models, none of them is enough for understanding the factors that characterize and explain the auction dynamics. We present results which demonstrate the advantages of applying our methodology. The final objective is to gain an understanding of what drives the dynamics of online auctions, the role of reactivity in the auction dynamics, and how the outcome of the auction is affected by the particular dynamics of the system.

The influence of equivocality in purchasing tasks on the selection of transaction channels in online auctions

Online auctions are one of the most active business models used in electronic commerce. Previous researchers address issues of online auction behaviour focusing on the factors influencing bidding intentions, but how bidders choose transaction channels to complete the consumption process is not examined before. This study conducts an experiment to manipulate the equivocality of purchasing task. Results show that when purchasing a product with higher task equivocality, bidders tend to choose a communication channel with higher information richness, and select a payment and product delivery channel with lower risk. When purchasing a product with lower task equivocality, bidders tend to select a communication channel with lower information richness, and tolerate higher risk to complete the payment and product delivery process.     

Bidder's strategy under group-buying auction on the Internet

The group-buying auction is a new kind of dynamic pricing mechanism on the Internet. It is a variant of the sellers' price double auction, which makes the bidders as a group through Internet to get the volume discounts, i.e., the more bidders bid, the lower the price of the object being auctioned becomes. In this paper, we analyze the group-buying auction under some assumptions, such as that the independent private values (IPVs) model applies and bidders are risk neutral and symmetric, etc., and build an incomplete information dynamic game model to illustrate the bidders' bidding process. It proves that for the bidders there exists a weakly dominant strategy S, i.e., no matter when a bidder arrives at the auction and what the bidding history is, the highest permitted bid price that is no greater than his value to the object is always his optimal bid price but may not be the unique one.     

Bidding strategies for real-life small loan auctions

We define and identify bidding strategies in real-life small loan auctions (Prosper.com). In such auctions, lenders bid for borrowers' loan listings and the winners get to fund the loan at an interest rate determined by the auction. The exceptionally large empirical database provided by Prosper.com offers a unique opportunity to test and further develop the theory of online auctions. This study shows that bidding behavior is not homogeneous among bidders, as the traditional auction theory suggests. Instead, bidders use many different bidding strategies. Moreover, learning and bidders' consistency over time in different auctions is studied.     

Improving the Performance of Online Auctions Through Server-side Activity-based Caching

Online auction sites have very specific workloads and user behavior characteristics. Previous studies on workload characterization conducted by the authors showed that (1) bidding activity on auctions increases considerably after 90% of an auction’s life time has elapsed, (2) a very large percentage of auctions have a relatively low number of bids and bidders and a very small percentage of auctions have a high number of bids and bidders, (3) prices rise very fast after an auction has lasted more than 90% of its life time. Thus, if bidders are not able to successfully bid at the very last moments of an auction because of site overload, the final price may not be as high as it could be and sellers, and consequently the auction site, may lose revenue. In this paper, we propose server-side caching strategies in which cache placement and replacement policies are based on auction-related parameters such as number of bids placed or percent remaining time till closing time. A main-memory auction cache at the application server can be used to reduce accesses to the back-end database server. Trace-based simulations were used to evaluate these caching strategies in terms of cache hit ratio and cache efficiency. The performance characteristics of the best policies were then evaluated through experiments conducted on a benchmark online auction system.     

Strong activity rules for iterative combinatorial auctions

Activity rules have emerged in recent years as an important aspect of practical auction design. The role of an activity rule in an iterative auction is to suppress strategic behavior by bidders and promote simple, continual, meaningful bidding and thus, price discovery. These rules find application in the design of iterative combinatorial auctions for real world scenarios, for example in spectrum auctions, in airline landing slot auctions, and in procurement auctions. We introduce the notion of strong activity rules, which allow simple, consistent bidding strategies while precluding all behaviors that cannot be rationalized in this way. We design such a rule for auctions with budget-constrained bidders, i.e., bidders with valuations for resources that are greater than their ability to pay. Such bidders are of practical importance in many market environments, and hindered from bidding in a simple and consistent way by the commonly used revealed-preference activity rule, which is too strong in such an environment. We consider issues of complexity, and provide two useful forms of information feedback to guide bidders in meeting strong activity rules. As a special case, we derive a strong activity rule for non-budget-constrained bidders. The ultimate choice of activity rule must depend, in part, on beliefs about the types of bidders likely to participate in an auction event because one cannot have a rule that is simultaneously strong for both budget-constrained bidders and quasi-linear bidders.     

Interplay between Buy-It-Now price and last minute bidding on online bidding strategies

Sellers and buyers on online auction sites like eBay have the option of setting and executing auction parameters such as auction length, Buy-It-Now price, starting price, reserve price, etc. Understanding why bidders choose to execute the Buy-It-Now price as opposed to submitting a bid at the last minute of an auction helps managers better choose auction parameters and generate more revenue. In this paper, we first study online bidder behavior pertaining to the execution of the Buy-It-Now option as opposed to the last minute bidding strategy on eBay. Consequently, we study the seller’s decision to set a Buy-It-Now option and the amount of it. Our main finding is that a dominant strategy for the seller is to offer a Buy-It-Now option at the beginning of the auction. An early bidder arriving at the auction site is indifferent in choosing threshold Buy-It-Now prices or moving onto the auction and under particular circumstances strategically waiting for the last minutes of the auction to submit a bid. We also provide conditions on the existence of a set of equilibria which predicts the outcome of the game of executing the Buy-It-Now option versus last-minute bidding on eBay.     

A scalable architecture for concurrent online auctions

Online auction systems are characterised by a number of functional and performance management requirements, caused by the potentially very large numbers of distributed concurrent bidders, as well as by the auction rules. Such systems are typically implemented as three tier, thread‐based architectures, whose performance does not scale up well with an increase in the number of concurrent bidders. Nor such systems can take advantage of new Cloud based environments. In this paper, we propose an architectural framework for online auctions developed on top of a soft real‐time platform (Open Telecom Platform) using a concurrent language (Erlang) and an embedded Web server (Yaws). The proposed framework can scale up to hundreds of thousands of concurrent users while its performance can benefit from multicore and symmetric multiprocessing computer architectures. We demonstrate the capabilities of the framework by developing prototypes for two auction types known as ‘unique bid’ and ‘penny’, analyse their performance characteristics and compare them with that of existing auction systems. Copyright © 2013 John Wiley & Sons, Ltd.     

How do bidders’ organism reactions mediate auction stimuli and bidder loyalty in online auctions? The case of Taobao in China

Currently, it is critical to nurture bidder loyalty in the highly competitive online auction business. This study investigated the mediating effect of consumer perceptions between technological/brand stimuli and bidder loyalty to an online auction website by applying the traditional and evolutionary stimulus–organism–response models. We tested these models using 449 bidders from Taobao, an online auction service provider in China. Based on the results of covariance-based structural equation modelling, we showed that consumer perceptions fully mediate technological stimuli, but only partially mediate brand stimuli, and bidder loyalty. These results can be used to further improve the related research and practice.     

Exploring the online bidder’s repurchase intention: a cost and benefit perspective

The success of online auctions is founded on bidders enjoying shopping benefits and on creating bidders’ loyalty. This study investigates the importance of bidders’ repurchase intention along with the corresponding cost and benefit aspects. Therefore, this study integrates transaction cost economics and expectancy confirmation theory to understand the determinants of bidders’ repurchase intention in online auctions. We collected data from a survey questionnaire, and a total of 594 valid questionnaires were analyzed. Partial least squares structural equation modeling was used to assess the relationships of the research model. The findings show that satisfaction has a significant influence on bidders’ repurchase intention, while transaction cost is negatively associated with repurchase intention. Bidders’ satisfaction is determined by confirmation and by the e-service quality of both auctioneers and sellers. Moreover, an auctioneer’s asset specificity and product uncertainty are positively associated with the bidder’s perceived transaction cost. The interaction frequency between bidder and seller is negatively associated with the bidder’s transaction costs. The research results provide a novel approach to understanding bidders’ benefit and cost dimensions in online auction marketplaces. Our findings could guide online auctioneers and sellers in enhancing their offerings.     

Multi-stage sequential uniform price auction mechanism for divisible goods

In this paper, we study the problem of auctioning a kind of continuous homogeneous divisible goods, and present a multi-stage sequential auction mechanism of divisible goods under uniform price. In this mechanism, the auction process is divided into multiple stages, all bidders satisfy the sequential rationality conditions, all bidders are asymmetric, every bidder is allowed to submit a nonincreasing continuous demand function in each round bidding, every bidder’s valuation to per unit of the goods is independent private information, and if a bidder does not obtain the quantity he wants in former stage auction, he still have another opportunity to obtain some quantity in the later stage auction. For this mechanism, we explore the formation process and composition of equilibrium points in each stage auction, and discuss the optimal strategy selection for bidders, then give the detail steps and an application example to show how to implement this multi-stage sequential auction mechanism. The conclusions can be drawn that our auction mechanism is an efficient incentive mechanism, and can effectively reduce many underpricing equilibrium and can yield higher expected income than a single uniform price auction for the auctioneer. It also can avoid the occurrence of failure auction (equilibrium does not exist), and effectively extend and improve the traditional single stage uniform price auction mechanism.     

IntelliBid: An Event-Trigger-Rule-Based Auction System over the Internet

This paper presents the design and implementation of an Event-Trigger-Rule-Based auction system called IntelliBid. A network of Knowledge Web Servers, each consisting of a Web server, an Event-Trigger-Rule (ETR) Server, an Event Engine, a Knowledge Profile Manager, and Bid Servers and their proxies constitutes IntelliBid. Together, they provide auction-related services to the creator of an auction site and the bidders and suppliers of products. IntelliBid offers a number of desirable features. First and foremost is the flexibility offered to bidders for defining their own rules to control their bids in an automatic bidding process, which frees the bidders from having to be on-line to place bids. By using different rules, the bidders can apply different bidding strategies. Second, it furnishes valuable statistical information about past auctions to both suppliers (or sellers) and bidders. The information can assist a bidder in bidding and a seller in setting a reasonable base price and/or the minimum incremental price. Third, since rules that control the automatic bidding are installed and processed by the ETR servers installed at bidders' individual sites, bidders' privacy and security are safeguarded. The statistical information that is released by IntelliBid only depicts the trend of the bidding prices of a product. The information about bidders is kept completely secret, thus safeguarding the privacy of the bidders. Fourth, IntelliBid's event, event filtering and event notification mechanisms keep both bidders and suppliers timely informed of auction events so that they or their software system can take the proper actions in the auction process. Fifth, any registered user of IntelliBid, bidder or supplier, can monitor the bids placed to any product being auctioned in IntelliBid. Sixth, IntelliBid allows bidders to do both on-line (or manual) bidding and automatic bidding. It also allows a bidder to participate in several auctions at the same time, in both manual and automated modes. The bidding of a product can depend on the result of the bidding of another product. Last, but not least, IntelliBid allows a person or organization to play both the role of bidder and the role of supplier simultaneously. The Profile Manager keeps the information as a bidder and information as a supplier separately. Moreover, IntelliBid's architecture uses a parallel event management system to do event registration and notification. This paper also reports the result of a performance study on the implication of using such a parallel system to achieve scalability.     

Bidding strategies in online single-unit auctions: Their impact and satisfaction

Online bidders use different strategies in their biddings. However, we are unsure of the bidders strategies and their effectiveness in achieving auction goals. Our study was an attempt to identify bidding strategies empirically in online single-unit auctions and evaluate their outcome in terms of cost saving, perceived bidder enjoyment, and bidder satisfaction. A research model was developed and used to examine the relationships. Both objective and subjective data of online single-unit auctions were collected from Taobao.com to validate our postulated hypotheses. We found three main bidding strategies: early, snipe, and agent-supported ratchet bidding based on their behavior patterns. These resulted in different levels of winning outcome and cost saving, but had no significant effect on perceived enjoyment. The hypotheses of the relationship between auction outcomes and bidder satisfaction of their bidding strategies were confirmed.     

An agent-based English auction protocol using Elliptic Curve Cryptosystem for mobile commerce

Rapid development of the Internet and the extensive use of mobile phones have increased demand for mobile devices in Internet auctions. This trend is acting as an incentive to develop an auction model for mobile-based environment. Recently, Kuo-Hsuan Huang proposed a mobile auction agent model (MoAAM), which allows the bidders to participate in online auctions through a mobile agent. He used modular exponentiation operations in his method. As a result, the processing time for key generation, bidding, and verification were long. Thus, we propose to add the concept of Elliptic Curve Cryptosystem (ECC) onto MoAAM, because ECC has low computation amount and small key size, both of which will aid to increase the speed in generating keys, bidding, and verification. In terms of reduction of computation load on mobile devices and auction-manager server, the proposed method will make online auction system more efficient as well as more convenient to use. This paper mainly uses the English auction protocol as the key auction protocol. The protocol consists of four entities: Registration Manager (RM), Agent House (AH), Auction House (AUH), and Bidders (B). The Registration Manager registers and verifies Bidder identity. The Agent House manages the agents and assigns public transaction keys to Bidders. The Auction House provides a place for auction and maintains all necessary operations for a smooth online auction. Bidders are buyers who are interested in purchasing items at the auction. Our proposed method conforms to the requirements of an online auction protocol in terms of anonymity, traceability, no framing, unforgetability, non-repudiation, fairness, public verifiability, unlinkability among various auction rounds, linkability within a single auction round, efficiency of bidding, one-time registration, and easy revocation.