Implementation in Weakly Undominated Strategies: Optimality of Second-Price Auction and Posted-Price Mechanism: Figure 1

2015 ◽  
Vol 82 (3) ◽  
pp. 1223-1246 ◽  
Author(s):  
Takuro Yamashita
Keyword(s):  
Price Mechanism ◽  
Price Auction ◽  
Second Price Auction ◽  
Posted Price

scholarly journals Auction Versus Posted Price Mechanisms in Online Sales: The Roles of Impatience and Dissuasion

2019 ◽  
Vol 7 (1) ◽  
pp. 75-88
Author(s):  
Subhasish M. Chowdhury ◽  
Debabrata Datta ◽  
Souvik Dhar
Keyword(s):  
Laboratory Experiment ◽  
Previous Experience ◽  
Price Mechanism ◽  
Online Sales ◽  
Auction Price ◽  
Price Auction ◽  
Waiting Cost ◽  
Posted Price

If all potential buyers participate in a first-price auction, then (theoretically) the auction price weakly exceeds the price placed by the seller under a posted price mechanism. However, it is documented that in online sales sellers prefer posted price mechanism to auction. We aim to explain this empirical contradiction in terms of partial participation of the buyers in auction, prompted by impatience and dissuasion. Auction on Internet often requires waiting, and hence, many impatient participants may not join the auction process. Furthermore, a previous experience of failure in auction may also prompt buyers’ non-participation. We show, theoretically, that in the case of partial participation, the price in auction may be lower; posted price turns out to be payoff dominant for both the buyers and the sellers. We then run a laboratory experiment and verify the presence of impatience (through waiting cost) and dissuasion factor (through previous failure) among the subjects.

Active bidders versus smart bidders

2019 ◽  
Vol 53 (4) ◽  
pp. 585-606 ◽  
Author(s):  
Kacy K. Kim ◽  
Michael J. Gravier ◽  
Sukki Yoon ◽  
Sangdo Oh
Keyword(s):  
Design Methodology ◽  
Online Auction ◽  
Product Categories ◽  
Minimum Number ◽  
Price Auction ◽  
Second Price Auction ◽  
Shopping Goals ◽  
Proxy Bidding ◽  
Practical Implications ◽  
At Will

Purpose The purpose of this paper is to contrast two lay theories of how consumers draw affective inferences about their online bidding experiences. The active-bidder theory (smart-bidder theory) predicts that after winning a bid, highly (minimally) participative bidders would be more satisfied than minimally (highly) participative bidders. Design/methodology/approach Four experiments test two competing hypotheses, the active-bidder hypothesis and the smart-bidder hypothesis (Study 1), identify a condition that mitigates the observed effects (Study 2), identify when the mitigation is effective or ineffective (Study 3) and replicate the findings in a scenario-based study where participants are allowed to make actual bidding decisions (Studies 4A and 4B). Findings The findings support the smart-bidder hypothesis across three different product categories; however, this heuristic-driven effect is absent when bidders have concrete shopping goals. The effect was sufficiently robust to be observed even when the bids are made at will. Research limitations/implications The present research does not incorporate the widely adopted procedure of second-price auction (also known as proxy bidding in the eBay setting), a system that allows the highest bidder to win the auction but pay the amount of the second-highest bid. Practical implications Online consumers should be mindful that entering the minimum number of bids not only helps consumers avoid overbidding but also elevates their joy in winning after the auction ends. Originality/value Prior research on bidding behavior on online auction sites has yet to examine how different bidding dynamics affect consumers’ post-auction satisfaction. This research sheds light on the psychological process underlying the robust phenomenon: online auction consumers rely heavily on proxy signals. Bidders appear to use the efficiency heuristic in constructing their affective judgments of their buying experiences.

scholarly journals Adverse Selection and Auction Design for Internet Display Advertising

2016 ◽  
Vol 106 (10) ◽  
pp. 2852-2866 ◽  
Author(s):  
Nick Arnosti ◽  
Marissa Beck ◽  
Paul Milgrom
Keyword(s):  
Adverse Selection ◽  
Auction Design ◽  
Display Advertising ◽  
Shill Bidding ◽  
Heavy Tailed Distributions ◽  
Price Auction ◽  
Second Price Auction ◽  
Heavy Tailed ◽  
The Cost ◽  
Second Price Auctions

We model an online display advertising environment in which “performance” advertisers can measure the value of individual impressions, whereas “brand” advertisers cannot. If advertiser values for ad opportunities are positively correlated, second-price auctions for impressions can be inefficient and expose brand advertisers to adverse selection. Bayesian-optimal auctions have other drawbacks: they are complex, introduce incentives for false-name bidding, and do not resolve adverse selection. We introduce “modified second bid” auctions as the unique auctions that overcome these disadvantages. When advertiser match values are drawn independently from heavy-tailed distributions, a modified second bid auction captures at least 94.8 percent of the first-best expected value. In that setting and similar ones, the benefits of switching from an ordinary second-price auction to the modified second bid auction may be large, and the cost of defending against shill bidding and adverse selection may be low. (JEL D44, D82, L86, M37)

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