Research on Seller's Shill Bid Strategy When Buyers Have Independent Private Evaluation

Abstract

As the rapid development of e-commerce, online auction has taken more and more proportion in the business. In online auction, bidders bid for a good on the Internet, which makes it difficult to find and bound the bidders' action, so cheating, say shilling by the seller, has become a popularity in online auction. Because it is so easy for a seller to bid in an online auction, then how to resist shill in online auction has become a problem worth studying. This paper solves this problem by studying the seller's shill bidding strategies in English auction, first-price sealed auction and second-price sealed auction, and it focuses attention on environment where bidders' evaluation of the good is independent private information. The result shows that if the online auction is an auction of second-price sealed auction, the seller's shill bid is equivalent to the seller's reserve price. Thus if the online auction is a second-price sealed auction, then it is not profitable for the seller to bid a shill price, so the seller will not engage in shill bidding. Because second-price sealed auction is not an auction which can easily be understood by the bidder, the paper gives some propositions on how to hold a second-price sealed auction on the Internet.