Competing Sellers in Online Markets: Reserve Prices, Shill Bidding, and Auction Fees Export

@article{Gerding2007Competing, abstract = {In this paper, we consider competition between sellers offering similar items in concurrent online auctions, where each seller must set its individual auction parameters (such as the reserve price) in such a way as to attract buyers. We show that in the case of two sellers with asymmetric production costs, there exists a pure Nash equilibrium in which both sellers set reserve prices above their production costs. In addition, we show that, rather than setting a reserve price, a seller can further improve its utility by shill bidding (i.e., pretending to be a buyer in order to bid in its own auction). But, through the use of an evolutionary simulation, we show that this shill bidding introduces inefficiences within the market. However, we then go on to show that these inefficiences can be reduced when the mediating auction institution uses appropriate auction fees that deter sellers from submitting shill bids. Specifically, we compare two types of auction fees and show that, in this respect, those based on the difference between the closing price and the reserve price are more effective than the commonly used fees that are based on closing price alone.}, author = {Gerding, Enrico and Rogers, Alex and Dash, Rajdeep and Jennings, Nicholas}, citeulike-article-id = {3613664}, citeulike-linkout-0 = {http://dx.doi.org/10.1007/978-3-540-72502-2_14}, citeulike-linkout-1 = {http://www.springerlink.com/content/l7515nm2p1k5h4q1}, citeulike-linkout-2 = {http://dx.doi.org/http://dx.doi.org/10.1007/978-3-540-72502-2_14}, citeulike-linkout-3 = {http://dx.doi.org/10.1007/978-3-540-72502-2_14}, comment = {How a seller should select their auction settings in order to best attract buyers and so increase their expected profits. Putting reserve price on item increases profit (higher margin) but also discourages buyers from bidding => lowering profits. This paper looks at shill bidding (bidding on your own item) we investigate how auction fees (i.e. the payments made by the seller to the institution for its services as a mediator) can be used by an institution to reduce the incentive for shill bidding within a setting of competing sellers. Using this simulation, we show that, by setting appropriate auction fees, an institution can both deter shill bidding and increase efficiency. Work with buyer, seller and mediator. Closing price fee (for making the sale) and reserve difference fee (closing-reserve price) - should discourage shill bidding. Using game theory for simple cases, else evolutionary algorithms to find strategy. mmmm.}, doi = {10.1007/978-3-540-72502-2_14}, journal = {Agent-Mediated Electronic Commerce. Automated Negotiation and Strategy Design for Electronic Markets}, keywords = {agents, auction, centralized, game-theory}, pages = {189--203}, posted-at = {2008-11-21 10:59:46}, priority = {0}, title = {Competing Sellers in Online Markets: Reserve Prices, Shill Bidding, and Auction Fees}, url = {http://dx.doi.org/10.1007/978-3-540-72502-2_14}, year = {2007} }

TY - JOUR ID - Gerding2007Competing L3 - citeulike-article-id:3613664 N2 - In this paper, we consider competition between sellers offering similar items in concurrent online auctions, where each seller must set its individual auction parameters (such as the reserve price) in such a way as to attract buyers. We show that in the case of two sellers with asymmetric production costs, there exists a pure Nash equilibrium in which both sellers set reserve prices above their production costs. In addition, we show that, rather than setting a reserve price, a seller can further improve its utility by shill bidding (i.e., pretending to be a buyer in order to bid in its own auction). But, through the use of an evolutionary simulation, we show that this shill bidding introduces inefficiences within the market. However, we then go on to show that these inefficiences can be reduced when the mediating auction institution uses appropriate auction fees that deter sellers from submitting shill bids. Specifically, we compare two types of auction fees and show that, in this respect, those based on the difference between the closing price and the reserve price are more effective than the commonly used fees that are based on closing price alone. JF - Agent-Mediated Electronic Commerce. Automated Negotiation and Strategy Design for Electronic Markets EP - 203 TI - Competing Sellers in Online Markets: Reserve Prices, Shill Bidding, and Auction Fees SP - 189 KW - agents KW - auction KW - centralized KW - game-theory N1 - How a seller should select their auction settings in order to best attract buyers and so increase their expected profits. Putting reserve price on item increases profit (higher margin) but also discourages buyers from bidding => lowering profits. This paper looks at shill bidding (bidding on your own item) we investigate how auction fees (i.e. the payments made by the seller to the institution for its services as a mediator) can be used by an institution to reduce the incentive for shill bidding within a setting of competing sellers. Using this simulation, we show that, by setting appropriate auction fees, an institution can both deter shill bidding and increase efficiency. Work with buyer, seller and mediator. Closing price fee (for making the sale) and reserve difference fee (closing-reserve price) - should discourage shill bidding. Using game theory for simple cases, else evolutionary algorithms to find strategy. mmmm. AU - Gerding, Enrico AU - Rogers, Alex AU - Dash, Rajdeep AU - Jennings, Nicholas PY - 2007/// UR - http://dx.doi.org/10.1007/978-3-540-72502-2_14 ER -