(A) study on online auctions in competition with posted-price markets

Abstract

Online auctions are one of the most successful forms of electronic commerce. The total value of items traded via online auctions has been growing consistently and items listed in auction sites have been quite diversified as online auction marketplaces expanded. In particular, “practicals” such as home appliances, digital devices, books, and clothes account for much of the volume. Meanwhile, since it is very likely that substitutes or even identical products to those practicals are offered elsewhere than online auctions, bidders participating in such auctions may be willing to buy substitutes instead of the auctioned item, if necessary. Therefore, online auction sellers of practical items are faced with competitive pressure, which is hardly observed in conventional offline auctions that usually sell unique items. This thesis basically analyzes revenue of online auction sellers as products identical to their auctioned items are available in posted-price markets to either part of or all of the bidders. First, the former case -“part of the bidders”- is investigated to see how the probability of spotting identical products affects the relationship between the number of bidders and the sellers’ revenue. If the probability is either very low or very high, the revenue shows relatively small increase as more bidders participate in the auction. However, if the probability remains in the mid-range, the number of bidders may have critical impact on the revenue. After this finding is derived from a simple mathematical model, actual online auction data which are aligned with the finding are presented. Since a seller can list her item in a larger marketplace or use promotional tools such as bold-faced titles to attract more bidders, the effects of those efforts are also addressed. Then the latter case -“all of the bidders” - is examined for the analysis of the effect of buy-price options on online auction outcomes. Enabling bidders to immediately buy out auctioned items,...