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Internet Auctions with Many Traders

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Author Info
Michael Peters
Sergei Severinov

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Abstract

A multi-unit auction environment similar to Ebay is studied. Sellers who wish to sell a single unit of a homogenous good set reserve prices for their own independently run auctions. Buyers who hope to acquire a single unit bid as often as they like in a dynamic second price auction. When the number of buyers and sellers is large but finite, there is a Bayesian equilibrium for this completely decentalized trading procedure in which the ex post efficient set of trades occurs at a uniform trading price. Remarkably, the strategy rules that buyers and sellers use in this equilibrium are very simple. They do not depend in any way on beliefs, or on the number of buyers and sellers.

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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number peters-01-01.

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Length: 31 pages
Date of creation: 11 Feb 2001
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Handle: RePEc:tor:tecipa:peters-01-01

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Peters, Michael & Severinov, Sergei, 1997. "Competition among Sellers Who Offer Auctions Instead of Prices," Journal of Economic Theory, Elsevier, vol. 75(1), pages 141-179, July. [Downloadable!] (restricted)
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  2. Wolfgang Pesendorfer & Jeroen M. Swinkels, 2000. "Efficiency and Information Aggregation in Auctions," American Economic Review, American Economic Association, vol. 90(3), pages 499-525, June. [Downloadable!] (restricted)
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  3. Ángel Hernando Veciana, 2001. "Competition Among Auctioneers," Working Papers. Serie AD 2001-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  4. Dekel, E. & Wolinsky, A., 2000. "Rationalizable Outcomes of Large Independent Private-Value First-Price Discrete Auctions," Papers 2000-13, Tel Aviv.
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  5. Roth, Alvin E. & Sotomayor, Marilda, 1992. "Two-sided matching," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 16, pages 485-541 Elsevier. [Downloadable!] (restricted)
  6. Wilson, Robert B, 1985. "Incentive Efficiency of Double Auctions," Econometrica, Econometric Society, vol. 53(5), pages 1101-15, September. [Downloadable!] (restricted)
  7. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November. [Downloadable!] (restricted)
  8. Rustichini, Aldo & Satterthwaite, Mark A & Williams, Steven R, 1994. "Convergence to Efficiency in a Simple Market with Incomplete Information," Econometrica, Econometric Society, vol. 62(5), pages 1041-63, September. [Downloadable!] (restricted)
  9. Jean-Jacques Herings, P., 1997. "A globally and universally stable price adjustment process," Journal of Mathematical Economics, Elsevier, vol. 27(2), pages 163-193, March. [Downloadable!] (restricted)
  10. Satterthwaite, Mark A & Williams, Steven R, 1989. "The Rate of Convergence to Efficiency in the Buyer's Bid Double Auction as the Market Becomes Large," Review of Economic Studies, Blackwell Publishing, vol. 56(4), pages 477-98, October. [Downloadable!] (restricted)
  11. Vijay Krishna & Motty Perry, 1997. "Efficient Mechanism Design," Game Theory and Information 9703010, EconWPA, revised 28 Apr 1998. [Downloadable!]
  12. Kelso, Alexander S, Jr & Crawford, Vincent P, 1982. "Job Matching, Coalition Formation, and Gross Substitutes," Econometrica, Econometric Society, vol. 50(6), pages 1483-1504, November. [Downloadable!] (restricted)
  13. Martin W Cripps & Jeroen M Swinkels, 2003. "Efficiency of Large Double Auctions," Levine's Working Paper Archive 666156000000000329, David K. Levine. [Downloadable!]
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  14. Rubinstein, Ariel & Wolinsky, Asher, 1990. "Decentralized Trading, Strategic Behaviour and the Walrasian Outcome," Review of Economic Studies, Blackwell Publishing, vol. 57(1), pages 63-78, January. [Downloadable!] (restricted)
  15. Jackson, Matthew O. & Jeroen Swinkels, 2004. "Existence of Equilibrium in Single and Double Private Value Auctions," Working Papers 1192, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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  16. Leonard, Herman B, 1983. "Elicitation of Honest Preferences for the Assignment of Individuals to Positions," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 461-79, June. [Downloadable!] (restricted)
  17. Peters, Michael, 1997. "A Competitive Distribution of Auctions," Review of Economic Studies, Blackwell Publishing, vol. 64(1), pages 97-123, January. [Downloadable!] (restricted)
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  18. Alvin E. Roth & Axel Ockenfels, 2000. "Last Minute Bidding and the Rules for Ending Second-Price Auctions: Theory and Evidence from a Natural Experiment on the Internet," NBER Working Papers 7729, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  19. Patrick Bajari & Ali Hortacsu, 2000. "Winner's Curse, Reserve Prices and Endogenous Entry: Empirical Insights from eBay Auctions," Econometric Society World Congress 2000 Contributed Papers 1927, Econometric Society. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michael Peters & Sergei Severinov, 2008. "An ascending double auction," Economic Theory, Springer, vol. 37(2), pages 281-306, November. [Downloadable!] (restricted)
    Other versions:
  2. Stanley Reynolds & John Wooders, 2009. "Auctions with a buy price," Economic Theory, Springer, vol. 38(1), pages 9-39, January. [Downloadable!] (restricted)
    Other versions:
  3. MINGLI ZHENG & Robert McMillan & SAJID ANWAR, 2005. "Bidding Behavior in Competing Auctions: Evidence from eBay," Microeconomics 0505001, EconWPA. [Downloadable!]
    Other versions:
  4. Art Shneyerov, 2006. "Dynamic Matching with Two-sided Incomplete Information and Participation Costs," Theory workshop papers 815595000000000009, UCLA Department of Economics. [Downloadable!]
  5. Patrick Bajari & Ali Hortacsu, 2002. "Cyberspace Auctions and Pricing Issues: A Review of Empirical Findings," Working Papers 02005, Stanford University, Department of Economics. [Downloadable!]
  6. Satterthwaite, Mark & Shneyerov, Art, 2004. "Dynamic Matching,Two-sided Incomplete Information, and Participation Costs: Existence and Convergence to Perfect Competition," Micro Theory Working Papers shneyerov-04-12-17-02-54-, Microeconomics.ca Website, revised 17 Dec 2004. [Downloadable!]
    Other versions:
  7. Marta Stryszowska, 2004. "Late and Multiple Bidding in Competing Second Price," Working Papers 2004.16, Fondazione Eni Enrico Mattei. [Downloadable!]
  8. Mark Satterthwaite & Artyom Shneyerov, 2003. "Convergence of a Dynamic Matching and Bargaining Market with Two-sided Incomplete Information to Perfect Competition," Discussion Papers 1384, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  9. Anderson, Steven & Friedman, Daniel & Milam, Garrett & Singh, Nirvikar, 2007. "Seller strategies on eBay: Does size matter?," MPRA Paper 4324, University Library of Munich, Germany. [Downloadable!]
  10. Sascha Füllbrunn, 2007. "Collusion or Sniping in simultaneous ascending Auctions," FEMM Working Papers 07025, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management. [Downloadable!]
  11. Stryszowska, M., 2004. "Late and multiple bidding in competing second price internet auctions," Discussion Paper 43, Tilburg University, Center for Economic Research. [Downloadable!]
  12. Axel Ockenfels, 2002. "New Institutional Structures on the Internet: The Economic Design of Online Auctions," Papers on Strategic Interaction 2002-08, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
  13. Jesse A. Schwartz & Ricardo Ungo, 2003. "Merging Auction Houses," Working Papers 0303, Department of Economics, Vanderbilt University. [Downloadable!]
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