The Rise of On-Line Auctions

Going, going, gone!

While auctions have been around since at least 500 B.C. the widespread
use and growth of the internet has greatly increased the popularity of
this kind of market. EBay alone has
about 1.8 Million items up for sale.

You can find anything from 5$ mugs to stock
shares being auctioned off on the web. Most of the auctions are the
standard “English” auctions where there is a single unit being sold and
the highest bidder wins. Several of the other sites, however, are branching
out to other kinds of auctions. Amazon.com and eBay, for example, give
you the option of choosing a standard auction style as well as a Dutch
auction if you are selling more than one unit.

As these auction sites mature, it will be interesting to see if they
branch out and offer different
kinds of auctions. All of the auctions so far seem to be as simple
as possible in order to entice people to participate. However, I suspect
as the bidders become more sophisticated, there will be a wider range of
auctions offered.

One interesting aspect of the auctions on-line is that they are almost
always open – that is, you can see the bids of others. In addition
to being a tool for selling, these auctions also seem to be a source of
information on the value of various items up for sale. One interesting
exception is the upcoming
auction of shares in Ravenswood
Winery where the bids are sealed.

The theory of auctions, once accounting for uncertainty, risk, and private
information can be immensely complex. The economics literature has devoted
much time and space and even part of a Nobel
Prize to the theory of auctions – both design
aspects as well as bidding behavior. The FCC
Auction has led to a cottage industry within the field. Some of the
more interesting work is happening in the experimental
economics field where various designs are tested with live subjects.

See below for some of the interesting links on auctions.

See Also

• 1996 Nobel Prize
  in Economic Sciences with a section on Vickrey and auctions.
• Auction Sites
• eBay
• Amazon.com
  – Auctions
• Egghead.com auctions
• OnSale
• Winebid.com
• Traditional Houses
• Christie’s
• Sotheby’s
• FCC Auction – the web site
• See also Analyzing
  the Airwaves Auction by McAfee and McMillan.
• Interview
  with Paul Milgrom of Stanford on the FCC auctions.
• Market Design, Inc.
  if you’re looking for auction consultants.
• US Treasury Security
  Auctions.
• Ravenswood –
• The Wine (I highly
  recommend the Zinfandels).
• the IPO
  stock auction.
• Red
  Herring story.
• Glossary of Auction
  Terms from the National Auctioneers
  Association.
• A Survey of Auctions including
  types and strategies.

• Miningco.com Online
  Auctions – from the Online Shopping site.
• Internet Auction List
  – large directory.
• Online Auctions from
  Charles Zheng.

Filed under: Microeconomics