Re: new Auction site - was: Calculator Joke - old already Message #8 Posted by sbirdasn on 3 May 2005, 1:06 a.m., in response to message #4 by Peter
Extending the auction... This idea has been debated endlessly on ebaY forever! Give it up. They don't do that kind of auction. Go to an auction house if that's what you want.
Now let's apply some game theory to this mess-
1. Assume everyone is a rational bidder who understands ebaY's proxy bidding system (everyone bids their "one-true-maximum-bid").
Every auction will have a random distribution of bids going up to the average selling price of the typical item +/- some amount of deviation and then go quiet until the end of the auction. Auction extensions would only be an annoyance in this case.
But, not everyone is a rational bidder in real life. So now what happens? Well, let's see.
The players:
Rational bidders (we know what they are).
Nibblers/Snibblers = Those who don't bid their "one-true-max-bid", and treat their bids as a normal live auction, only bidding enough to outdo the previous bidder's maximum bid.
Shill bidders = Illegal bidding by seller and/or agents to drive up price artificially.
Snipers = Rational bidders who bid late in the auction to prevent retaliatory bidding by irrational/illegal bidders outlined above.
Note that rational and sniper bidders use ebaY's proxy bidding system as it was designed to work. It's fool proof and works perfectly. It's no different than if you hired/sent a proxy agent to a live auction house to do your bidding in your absence.
Auction/bidder match ups (assume no errors in listing/finding auction, outcome is typical for normal auctions, and outcomes compared to rational vs. rational bidder auctions):
Case 1:
Rational vs. Rational, R vs. Sniper, S vs. S -- Same outcome as if all bidders are rational - auction ends at market value in most cases.
Case 2:
Rational vs. Nibbler/Snibbler, N vs. N -- Depends on motivation of Nibbler - Below market value if not aware/willing to pay market value, above market value if bidding man/womanhood. Getting something for a "steal" is more rare. Tends to drive ending price up.
Case 3:
Nibbler vs. Shill, Rational vs. Shill -- Above market values.
Case 4:
Nibbler vs. Sniper -- At market value or below. (Nibbler whines about "their" auction being stolen (side effect of subconscious knowledge that they're a loser/dufus/dweeb who doesn't know/like the rules of the game).
Case 5:
Shill vs. Sniper (if at all) -- At or below market value, but below market values may be somewhat higher than straight rational bidding would result. Note that shill bidding is not an effective strategy here as seller risks eating the listing fees or exposing their shill account to unwanted scrutiny by other bidders, so this is not a common scenario.
So what happens if you add auction extensions?
1. Rational bidders no longer have any method to protect themselves from predatory/illegal bidders (sniping)-- Average auction ending bid prices go up, with an additional side effect of a larger standard deviation spread. Also, rational bidders leave, as they don't want to be taken advantage of. Result = ebaY goes to H*ll in a hand-basket.
2. Everyone goes crazy (both buyers and sellers) because they never know when an auction is really ended.
Note that I'm not going to analyze other rule changes like only allowing a *single* bid, sealed bid format auctions, etc.
The point here is that the real issues of ebaY have to do with the fact that not all bidders are rational or legal, and not all sellers are honest/ethical. Note that ebaY doesn't want to change their system as it benefits them if the non-rational bidders are present, as it drives up the ending price, and fees are based on that ending price. That's why ebaY does little tricks like sending an email if someone else bids close to your own proxy bid to entice non-rational bidders to re-bid (what, you didn't bid your "one-true-max-bid"? Sucker...)
So, consider the side effects for changing a rule to "fix" a particular bidding system.
Tony.
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