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Exploring Internet Auctions: Theory and Practice - Spring 2008 Overview

This document provides a comprehensive overview of internet auctions, focusing on theories and practical applications explored in the Spring 2008 course by Ken Steiglitz. Key topics include executing bids, the evolution of online auction mechanisms like eBay, and foundational theories such as truthful bidding and auction equivalencies (Vickrey, English, Dutch). It discusses auction dynamics, probability assumptions, and explores various auction forms including mail-bid and buy-or-bid sales. Additionally, it examines disincentives to truthful bidding and analyzes the auction market landscape, including influential platforms like Taobao.

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Exploring Internet Auctions: Theory and Practice - Spring 2008 Overview

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  1. COS 444 Internet Auctions:Theory and Practice Spring 2008 Ken Steiglitz ken@cs.princeton.edu

  2. Praxis • Cassady on executing the (English) bid • Book bids, anticipating eBay • Mail-bid sales • Buy-or-Bid sales (cf Buy-It-Now on eBay) • Ticks (= increments)

  3. Theory: the four basic auctions English weakly equivalent toVickrey Dutch strategically equivalent to FP

  4. Theory: truthful bidding • Truthful bidding is weakly dominant in Vickrey auctions • Truthful bidding is also weakly dominant in (Japanese button) English auctions, but not in ascending-price or outcry English auctions

  5. Theory: probability • pdf • cdf • Expectation

  6. Theory:probability • Almost universal assumption: range normalized to [0,1] • Common assumption for examples, etc., v ’s “uniformly distributed on[0,1]” , which means f (x ) = 1 , F (x ) = x and iid = “independently and identically distributed”

  7. Praxis • Disincentives to truthful bidding • Evolution of eBay from mail-bid sales (conceptually anyway) • The "California auction" as an abstraction • Other online closing rules, Amazon & Yahoo • Taobao, the Chinese online auction site?

  8. Theory: simplest RE • Back to n=2 bidders, uniform iid v ’s • E[pay] in SP, when bidders bid truthfully, is average second-price = 1/3 (to be proved shortly) • E[pay] in FP at equilibrium is • E[pay] in FP is average of this over v1=1/6 times 2 bidders = 1/3 … same as SP

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