Short Paper:

Aspects of bidding behaviour on eBay

Maastricht University
School of Business and Economics
Aachen, 9 November 2010
ID number: I6019751
Name: Svenja Koida
Study: International Business
Course code: EBC1009
Group number: 35
Tutor name: A. Pieters
Language tutor name: M. Lovering
Writing Assignment: Short Paper


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1. Introduction

The American company eBay which was founded in 1995 operates the world's largest
Internet auction house and expanded to a multi-billion dollar business over time.
eBay.com is an online auction in which more than 90 million active users worldwide
(eBay, n.d./2010) sell and buy a broad variety of different products. For this purpose
diverse bidding behaviours exist which can be adopted by the buyer or the seller and which
may have an impact for instance on the final selling price.

The following short paper will discuss different aspects of bidding behaviour in
relationship with the timing aspect on eBay auctions and their effect on the outcome of the
auction. The first paragraph gives a short description of the most common type of auctions
utilised by eBay users, the second one concentrates on the importance of time in an auction
which includes bidding behaviours like last-minute bidding and sniping, and the final
paragraph of this short paper offers a conclusion to the question whether and how these
bidding behaviours have an impact on the final outcome of the auction.


2. eBays most common auction type

Lucking-Reiley, Bryan, Prasad, and Reeves found out that every eBay auction uses an
ascending-bid (English) format with a fixed end time set by the seller (2006). This means
that the seller sets a low opening bid at the beginning and other eBay users who are
interested in the product submit their maximum bids at some point during the auction with
the aim that the bidder with the highest bid receives the product in the end. Hereby the
seller can decide individually concerning some features like the actual value of the opening
bid or the duration of the auction. Furthermore eBay added the buy it now feature which is
a price set by the seller for which the buyer can directly receive the product
(Knowledge@Wharton, 2006, February 08) without actually taking part in the bidding
process or the need for a certain bidding strategy to win the auction.





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3. Bidding timing

One of the most important aspects in an auction is the time aspect. The point at which the
buyer submits his final maximum bid may have huge impact on the outcome of the auction
and the bidders success. Most bidders concentrate on the end of an auction rather than on
the whole auction period because they expect the greatest success of this last-minute
bidding behaviour.
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Indeed approximately 75% of final bids are submitted after 97% of the
auction duration has already passed (Knowledge@Wharton).

Another often used bidding behaviour and within an even more advanced version of last-
minute bidding is sniping which is the process of watching a timed online auction and
placing the highest bid at the last possible moment. This behaviour makes it impossible for
the other bidders to further outbid the sniper so that they lose the auction. Nowadays some
software is available for this purpose which carries out the sniping process for the
individual so that the chance of winning gets even greater.


4. Conclusion

When talking about the outcome of an auction one can say that this depends on the adopted
bidding strategy. Last-minute bidding influences the bidders success in an auction. The
risk that the time it takes to place a bid may vary considerably due to, for instance,
internet congestion or connection times (Ockenfels and Roth, 2002) is very high which
means that there is a huge chance for the last-minute bidder of losing an auction because he
or she missed the very last seconds.
On the other hand bidding too early in an auction impacts the final price. When there is
still enough time for other bidders to react one may arouse bidding wars by this behaviour
which influence the final price of the product by raising it. This happens because in a
bidding war each involved bidder tries to hold the highest bid in the very last moment so
that every bidder outbids the others as long as time allows it.



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See Appendix, Figure 1

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In general one can conclude that different bidding behaviours and especially bidding
timing impact the outcome of an auction and the sales price of the product. The most
important aspect may be the exact point at which the bidder submits his or her maximum
bid and to hit this point, therefore neither to bid too early nor too late. When developing a
bidding strategy which aims at winning an auction and receiving the product at a relative
low price one should take these aspects into account since they determine the outcome a
lot.









































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5. References


eBay, n.d./2010. As the world's leading e-commerce company, eBay Inc.'s global portfolio
of businesses enables hundreds of millions of people to buy, sell and pay online.
Take a closer look. Retrieved from:
http://www.ebayinc.com/who

Knowledge@Wharton (2006, February 08). Going Once... Going Twice... The Bidding
Behavior of Buyers in Internet Auctions.
http://knowledge.wharton.upenn.edu/article.cfm?articleid=1378

Lucking-Reiley, D., Bryan, D., Prasad, N., & Reeves, D. (2006). Pennies from eBay: the
determinants of price in online auctions. Journal of Industrial Economics, 55,2, 223-
234. DOI: 10.1111/j.1467-6451.2007.00309.x

Ockenfels, A., Roth, A. E. (Fall 2002), The Timing of Bids in Internet Auctions: Market
Design, Bidder Behavior, and Artificial Agents. AI Magazine, 79-88
http://kuznets.harvard.edu/~aroth/papers/eBay.ai.pdf


Figures:

Ockenfels, A., Roth, A. E. (Fall 2002), The Timing of Bids in Internet Auctions: Market
Design, Bidder Behavior, and Artificial Agents. AI Magazine, 79-88
http://kuznets.harvard.edu/~aroth/papers/eBay.ai.pdf



6. Appendix
Figure 1: Bidders last bids over time (Ockenfels and Roth, 2002)