Are eBay auctions efficient? A model with buyer entries

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Are eBay auctions efficient? A model with buyer entries

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Huang, Ching-I

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Ching-I Huang

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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 7754.

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Date of creation: 14 Mar 2008
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Handle: RePEc:pra:mprapa:7754

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-03-25 (All new papers)
NEP-CTA-2008-03-25 (Contract Theory & Applications)
NEP-ORE-2008-03-25 (Operations Research)

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Patrick Bajari & Ali Hortacsu, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June. [Downloadable!] (restricted)
Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer. [Downloadable!] (restricted)
Axel Ockenfels & David Reiley & Abdolkarim Sadrieh, 2006. "Online Auctions," NBER Working Papers 12785, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)

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