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Sellers competing for buyers in online markets: reserve prices, shill bids, and auction fees

Published: 06 January 2007 Publication History

Abstract

We consider competition between sellers offering similar items in concurrent online auctions through a mediating auction institution, 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., bidding as a buyer in its own auction). This shill bidding is undesirable as it introduces inefficiencies within the market. However, through the use of an evolutionary simulation, we extend the analytical results beyond the two-seller case, and we then show that these inefficiencies can be effectively reduced when the mediating auction institution uses auction fees based on the difference between the auction closing and reserve prices.

References

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{Burguet and Sákovics, 1999} R. Burguet and J. Sákovics. Imperfect competition in auction design. International Economic Review, 40(1):231-247, 1999.
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{Byde et al., 2002} A. Byde, C. Preist, and N.R. Jennings. Decision procedures for multiple auctions. In Proc. 1st Int. Joint Conf. on Autonomous Agents and Multi-Agent Systems (AAMAS2002), Bologna, Italy, pages 613-620. ACM Press, 2002.
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{Hernando-Veciana, 2005} &Aacute. Hernando-Veciana. Competition among auctioneers in large markets. Journal of Economic Theory, 121:107-127, 2005.
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{Kauffman and Wood, 2005} R.J. Kauffman and C.A. Wood. The effects of shilling on final bid prices in online auctions. Electronic Commerce Research and Applications, 4:21-34, 2005.
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{Krishna, 2002} V. Krishna. Auction Theory. Academic Press, 2002.
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{McAfee, 1993} R. Preston McAfee. Mechanism design by competing sellers. Econometrica, 61(6):1281-1312, 1993.
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{Wang et al., 2004} W. Wang, Z. Hidvégi, and A.B. Whinston. Shill-proof fee (SPF) schedule: The sunscreen against seller self-collusion in online english auctions. Working Paper, 2004.

Cited By

View all
  • (2013)Competing intermediary auctionsProceedings of the 2013 international conference on Autonomous agents and multi-agent systems10.5555/2484920.2485026(667-674)Online publication date: 6-May-2013
  • (2013)Computing pure Bayesian-Nash equilibria in games with finite actions and continuous typesArtificial Intelligence10.1016/j.artint.2012.09.007195(106-139)Online publication date: 1-Feb-2013
  • (2011)Auctions and biddingACM Computing Surveys10.1145/1883612.188361743:2(1-59)Online publication date: 4-Feb-2011
  • Show More Cited By
  1. Sellers competing for buyers in online markets: reserve prices, shill bids, and auction fees

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      Information & Contributors

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      Published In

      cover image Guide Proceedings
      IJCAI'07: Proceedings of the 20th international joint conference on Artifical intelligence
      January 2007
      2953 pages
      • Editors:
      • Rajeev Sangal,
      • Harish Mehta,
      • R. K. Bagga

      Sponsors

      • The International Joint Conferences on Artificial Intelligence, Inc.

      Publisher

      Morgan Kaufmann Publishers Inc.

      San Francisco, CA, United States

      Publication History

      Published: 06 January 2007

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      View all
      • (2013)Competing intermediary auctionsProceedings of the 2013 international conference on Autonomous agents and multi-agent systems10.5555/2484920.2485026(667-674)Online publication date: 6-May-2013
      • (2013)Computing pure Bayesian-Nash equilibria in games with finite actions and continuous typesArtificial Intelligence10.1016/j.artint.2012.09.007195(106-139)Online publication date: 1-Feb-2013
      • (2011)Auctions and biddingACM Computing Surveys10.1145/1883612.188361743:2(1-59)Online publication date: 4-Feb-2011
      • (2010)A game-theoretic analysis of market selection strategies for competing double auction marketplacesProceedings of the 9th International Conference on Autonomous Agents and Multiagent Systems: volume 1 - Volume 110.5555/1838206.1838321(857-864)Online publication date: 10-May-2010
      • (2009)Setting discrete bid levels adaptively in repeated auctionsProceedings of the 11th International Conference on Electronic Commerce10.1145/1593254.1593284(195-204)Online publication date: 12-Aug-2009
      • (2008)Optimal strategies for bidding agents participating in simultaneous Vickrey auctions with perfect substitutesJournal of Artificial Intelligence Research10.5555/1622673.162269732:1(939-982)Online publication date: 1-Aug-2008
      • (2008)Computing reserve prices and identifying the value distribution in real-world auctions with market disruptionsProceedings of the 23rd national conference on Artificial intelligence - Volume 310.5555/1620270.1620318(1499-1502)Online publication date: 13-Jul-2008
      • (2008)A Heuristic Based Seller Agent for Simultaneous English AuctionsProceedings of the 2008 conference on ECAI 2008: 18th European Conference on Artificial Intelligence10.5555/1567281.1567379(443-447)Online publication date: 27-Jun-2008

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