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Snipers, Shills, and Sharks

Snipers, Shills, and Sharks. Ken Steiglitz Princeton University Press, 2007. Find the treasure!. A bronze coin from Tyre, Phoenicia, under the reign of Valerian I, 253-260 AD.

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Snipers, Shills, and Sharks

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  1. Snipers, Shills, and Sharks Ken Steiglitz Princeton University Press, 2007

  2. Find the treasure!

  3. A bronze coin from Tyre, Phoenicia, under the reign of Valerian I, 253-260 AD. Dido stands left holding sceptre and cubit rule; to the left a mason working on the top of a gateway, below a man digging with a pick.

  4. Neapolis, Samaria, Mt. Gerazim, supported by eagle, under Trebonius Gallus, 251-3 AD

  5. Gaba, Trachonitis, Coele-Syria, Ant. Pius, 138-161 AD, tetrastyle temple with three arches above, within, turreted city goddess wearing long chiton, hldg. long standard in r. hand, cornucopiae in left, crowned by Nike on pedestal to r.; in ex.: GABHNwN,

  6. The nineteenth-century art expert Edmond Bonnaffe’ is reported to have observed that "after Michelangelo's pictures and the Medici porcelain the rarest thing he had ever seen among collectors was goodwill, and he drew the conclusion that collectors‘ mania embraced the desire to own things for oneself, the desire to own them for others, and the desire to stop other people owning anything." M. Rheims, "The Strange Life of Objects: 35 Centuries of Art Collecting", Atheneum Publishers, New York, 1961, (Translated from the French by D. Pryce-Jones)

  7. Three questions, three levels • Why is eBay so successful? • What is the received theory of auctions? • How well does the theory work in predicting human behavior?

  8. Why is eBay so successful? • The mechanism: Not the most obvious way to run an online auction! • Winner pays second-highest bid • At any point, next-highest bid is posted • Bidding ends at a fixed time

  9. A trusted third party • Transparency engenders trust… and can invite interlopers: eBay treads the line • Recent compromises: bidder ID’s • 1) anonymized after bids reach $200 • 2) can no longer search by bidder for active auctions

  10. Wins Nobel prize 1996 1961 paper proposes 2nd-price auctions, now called “Vickrey auctions” Theoretical roots: William Vickrey

  11. Plus John Nash • Equilibrium behavior: translates human behavior to a mathematical condition • Bidding one’s private value is dominant Wins Nobel prize, 1994

  12. The lay of the theoretical land

  13. Most naïve theory • Bid your private value • Sit back and relax… • In this context, eBay is a Vickrey auction This is eBay’s “proxy bidding” Hopelessly naïve

  14. Early bidding vs. Sniping • But early bidding affects behavior WAR

  15. Dangers of early bidding, con’t As bait

  16. Dangers of early bidding, con’t Curiosity

  17. The internet as a laboratorya goldmine of data • Empirical studies are proliferating • They augment laboratory experiments • They augment theory • Typical studies: • Hossain & Morgan 2003: Test of revenue equivalence • Katkar & Lucking-Reiley 2000: Is a secret reserve a good idea?

  18. General conclusions:very basic economics • Buyers should try to decrease competition: bid late, lay low, hide expertise; i.e., snipe • Sellers should try to increase competition: use low opening bids, avoid secret reserves if possible, be nice to buyers! • eBay’s interests generally align with sellers

  19. Some recent empirical results • Bidders snipe more often on collectibles -- more incentive to hide interest and expertise • Buyers tend to overlook somewhat higher shipping costs • Bidders tend to avoid items with secret reserves • Bidders tend to prefer auctions with many bidders (herding behavior)

  20. The dark side • Shills • Shadowing bidders • Exporting and importing cultural artifacts • Fakes • Rings (bidder collusion)?

  21. A (likely) shill Reserve = $95 ______ • Bidder 3 bids $94 when the reserve is $95 and the high bid is below that. She has feedback of 1. A likely shill.

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