COS 444 Internet Auctions: Theory and Practice

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COS 444 Internet AuctionsTheory and Practice
Spring 2008 Ken Steiglitz
ken_at_cs.princeton.edu
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Theory

• First-Price equilibrium Intuition
• Third-Price equilibrium Intuition
• Why study third-price auctions?
• (Kagel-Levin 93, more later)

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Theory

• Equilibrium on First-Price auctions
• Baseline IPV model, values iid as F (v)
• Esurplus of 1
• pr1 wins v1 b ( v1 )
• Bidder 2 bids b (v)

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Theory

• The equilbrium condition is that

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Theory

• This leads to a linear, first-order differential
  equation for b(v)

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Theory

• Solution
• optimal shade

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eBay observed

• Assignment 2 provides a tool for visualizing
  behavior
• Some examples

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Early bidding vs. Sniping

• But early bidding affects behavior

WAR
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Dangers of early bidding, cont
As bait
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Dangers of early bidding, cont
Curiosity
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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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