Conventional Auction Research Articles

Assessing Stakeholders' Satisfaction with the Transformation of Conventional Auction into an E-Auction

Assessing Stakeholders' Satisfaction with the Transformation of Conventional Auction into an E-Auction

Impact of Process Misconception in Becker-DeGroot-Marschak Single Response Value Elicitation Procedures: An Experimental Investigation in Consumer Behavior Using the IKEA Effect

Consumer researchers frequently employ valuation experiments to assess consumer opinions and test related hypotheses. One popular method used in many such experiments is the Becker- DeGroot-Marschak (BDM) single-response value elicitation procedure that initiates an incentive for the subjects to respond with their true valuation by utilizing a random bid to which the participants’ bid is compared. However, the “random bid” is not a straightforward concept, and the participants may not fully understand the mechanics of the bidding process. Therefore, they may incorrectly associate the bidding mechanism with a conventional auction bidding process in which the highest bidder wins, causing biased valuation outcomes. In this paper, we introduce a comprehension measurement step to eliminate the process comprehension bias in BDM valuation experiments. We also discuss the potential impact of the treatment of “zero” bidders in the BDM procedure. The present work shows that the size and statistical significance of past consumer research results are positively correlated with the participant comprehension of the valuation procedure. The results suggest that consumer research using a single-response value elicitation procedure, which initiates an incentive for the subjects to respond with their true valuation, may not be trusted if the comprehension level is not controlled.

Auction mechanisms for allocating subsidies for carbon emissions reduction: an experimental investigation

One method to reduce greenhouse gas emissions is to subsidize emissions-reducing activities, and allocating such subsidies through auctions is an emerging mechanism. In a controlled experimental market setting, we conduct a laboratory experiment to compare the effects of a variety of auction mechanisms for allocating subsidies in an effort to reduce carbon emissions in China. In addition to the conventional auction mechanisms, we place particular focus on testing the performance of the auction mechanism proposed by Erik Maskin (Notes on auctions for pollution reduction. In: Keynote Speech at the 18th annual conference of European Association for Environmental and Resource Economists, Rome, 2011). We find that while the Maskin auction mechanism spends the most from a fixed subsidy budget and its emissions reduction is among the largest, its per-unit emissions reduction cost is higher than that of discriminatory and uniform-price auction mechanisms. Furthermore, from the government’s perspective, the Maskin auctions exhibit strong improvement tendency with repeated auctions.

Double Auctions for Dynamic Spectrum Allocation

Wireless spectrum is a precious resource and must be allocated and used efficiently. Conventional spectrum allocations let a government agency (e.g., FCC) sell a portion of spectrum to one provider. This is not only restrictive, but also limits spectrum reuse and may lead to significant under-utilization of spectrum. In this paper, we develop a novel truthful double-auction scheme to let any resource owner (e.g., a cellular provider), who has spare spectrum at a given time period, sell to one or more providers that need additional spectrum at that time. Spectrum auctions are fundamentally different from conventional auction problems since spectrum can be reused and competition among buyers is complex due to wireless interference. Our proposal is the first double-auction design for spectrum allocation that explicitly decouples the buyer-side and seller-side auction design while achieving: 1) truthfulness; 2) individual rationality; and 3) budget-balance. To accurately capture wireless interference and support spectrum reuse, we partition the conflict graph so that buyers with strong direct and indirect interference are put into the same subgraph, and buyers with no interference or weak interference are put into separate subgraphs. Then, we compute pricing independently within each subgraph. We then develop a scheme to combine spectrum allocation results from different subgraphs and resolve potential conflicts. We further extend our approach to support local sellers whose spectrum can only be sold to buyers within certain regions, instead of all buyers. Using conflict graphs generated from real cell tower locations, we extensively evaluate our approach and demonstrate that it achieves high efficiency, revenue, and utilization.

Factors Influencing Consumer Adoption for Network Fellowship Auction in Taiwan

The emerging online economy in recent years has facilitated the rapid growth of e-commerce, such as Internet bank, e-wallet, and electronic bidding. Network fellowship auction is a collective effort by people who network and pool their money together by Internet in order to invest in and support efforts initiated by other people or organizations. Network fellowship auction has replaced conventional fellowship auction by offering a new safer and faster financial instrument. This research investigated the determinants of network fellowship auction user acceptance, including consumer perceived risk, perceived value, computer self-efficacy, and product involvement. An online survey was used with a sample of 446 respondents. Structural equation models (SEM) were used to examine hypotheses in the theoretical framework. The results showed that consumer perceived risk substantially negatively influenced perceived ease of use and intention; consumer perceived value positively influenced perceived usefulness; consumer computer self-efficacy positively influenced perceived ease of use. Additionally, consumer perceived usefulness, perceived ease of use, and product involvement positively influenced consumer intention.

The Role of Signals in Online Auction Purchase Decisions

Abstract There is a growing interest in behavioural economics contradicting the empirical prediction of rational choice theory once applied to online auctions. The issue is of particular relevance due to the large use of online auctions and the anticipated growth in the future. Online auctions combine the conventional auction model with information technology. However, information asymmetry within such auctions causes risks and uncertainties that influence consumer purchase intentions. The research investigates online consumers’ behaviour. The Authors suggest that due to the high perceived risk of the online buying process consumers are prompted to use cues of seller’ reputation. In a series of six experiments conducted via the auction site Allegro.pl in Poland a number of signals from auction web pages has been manipulated to influence purchase intention. The results suggest that several signals can be used to stimulate online customers’ behaviour. The results of these experiments indicate that buyers are more susceptible to the influence of “visual” signals than signals that require greater involvement of the buyer (to read information). The conducted experiments contribute to a more comprehensive understanding of online auction users’ behaviour. And finally it provides some managerial implications to increase online auction effectiveness from the seller’s perspective.

Electricity market clearing with improved scheduling of stochastic production

In this paper, we consider an electricity market that consists of a day-ahead and a balancing settlement, and includes a number of stochastic producers. We first introduce two reference procedures for scheduling and pricing energy in the day-ahead market: on the one hand, a conventional network-constrained auction purely based on the least-cost merit order, where stochastic generation enters with its expected production and a low marginal cost; on the other, a counterfactual auction that also accounts for the projected balancing costs using stochastic programming. Although the stochastic clearing procedure attains higher market efficiency in expectation than the conventional day-ahead auction, it suffers from fundamental drawbacks with a view to its practical implementation. In particular, it requires flexible producers (those that make up for the lack or surplus of stochastic generation) to accept losses in some scenarios. Using a bilevel programming framework, we then show that the conventional auction, if combined with a suitable day-ahead dispatch of stochastic producers (generally different from their expected production), can substantially increase market efficiency and emulate the advantageous features of the stochastic optimization ideal, while avoiding its major pitfalls.A two-node power system serves as both an illustrative example and a proof of concept. Finally, a more realistic case study highlights the main advantages of a smart day-ahead dispatch of stochastic producers.

Optimal and efficient takeover contests with toeholds

Target firms often face a takeover threat from raiders with prior stakes in its ownership (toeholds). Previous literature has shown that, when takeovers are modeled as standard auctions, toeholds induce more aggressive bids from raiders, which has two important consequences for the selling process: (i) the board of directors is no longer indifferent about the sale procedure used to get the highest price, and (ii) the target may not be assigned to the highest-value raider. This paper characterizes how the price-maximizing procedure should be in the presence of asymmetric toeholds. Our central result is that the optimal rule needs to be implemented by a discriminatory mechanism quite different from conventional auction formats. By imposing an extra-charge against high-toehold bidders, the optimal mechanism is able to extract more surplus from raiders who bid more aggressively. As a result, nonbidding shareholders benefit unambiguously from the toehold asymmetry. Furthermore, as this bias restores the symmetry in bidders’ expected payoffs, the proposed mechanism also allows to allocate efficiently the target among them.

The influence of an online auction’s product price and e‐retailer reputation on consumers’ perception, attitude, and behavioral intention

Online auctions combine the conventional auction model with information technology. However, information asymmetry within such auctions causes risks and uncertainties that influence consumer purchase intentions. In this study, a 2 (product price: high vs. low) × 2 (e-retailer reputation: high vs. low) experimental design was used to understand whether the product price and e-retailer reputation will influence consumers' perceived risk, attitude toward the website and purchase intention. The results of this study indicate that perceived risk negatively influences consumer attitude toward the website and online purchase intention, while consumer attitude toward the website positively influences purchase intention. Moreover, involvement moderates the influence of product price and e-retailer reputation only on social risk but does not have a significant effect on consumer attitude toward the website. This study contributes to a more comprehensive understanding of online auction users' behavior. Finally, the managerial implications, limitations and future research directions are also provided.

Experiments with probabilistic quantum auctions

We describe human-subject laboratory experiments on probabilistic auctions based on previously proposed auction protocols involving the simulated manipulation and communication of quantum states. These auctions are probabilistic in determining which bidder wins, or having no winner, rather than always having the highest bidder win. Comparing two quantum protocols in the context of first-price sealed bid auctions, we find the one predicted to be superior by game theory also performs better experimentally. We also compare with a conventional first-price auction, which gives higher performance. Thus to provide benefits, the quantum protocol requires more complex economic scenarios such as maintaining privacy of bids over a series of related auctions or involving allocative externalities.

Nibbling, Sniping, and the Role of Uncertainty in Second-Price, Hard-Close Internet Auctions

Internet auctions have gained widespread appeal as an efficient and effective means of buying and selling goods and services. This study examines buyer behavior on eBay, one of the most well-known Internet auction Web sites. eBay’s auction format is similar to that of a second-price, hard-close auction, which gives a rational participant an incentive to submit a bid that is equal to his or her maximum willingness to pay. But while traditional second-price, hard-close auctions assume that participants have reliable information about their own and other bidders’ reservation prices, eBay participants usually do not. This raises the possibility that eBay participants may adapt their bidding strategies and not actually bid their reservation prices because of increased uncertainty. In this article, we empirically examine the bidding patterns of online auction participants and compare our findings to the behavior of bidders in more conventional auction settings.

Auction-Based Slot Allocation for Traffic Demand Management at Hartsfield Atlanta International Airport: A Case Study

Ongoing research is described for an auction model, a hybrid demand management approach for congested airports. This approach is intended to optimize the use of airport time slots by maximizing passenger throughput with safe capacity, decreasing congestion, and less delay. The two submodels mathematically formulate conflicting optimization problems of efficiency-driven airport regulators and cost-driven airlines. By ranking key factors such as monetary bidding, flight origin-destination pairs, enplanement capability, and airlines' previous investments, a framework is presented that is open to many design alternatives. Two design alternatives are analyzed in a case study of Hartsfield Atlanta International Airport, Georgia, to compare different allocation schemata and resulting airport performance. The performance analysis used a queuing model simulation. By varying weighting coefficients for bid vectors, it is proposed that the effects of administrative coordination and market force on outcomes of the auction process could be monitored to achieve airport-specific benefits. It is also suggested that the conventional auction format that uses monetary bidding alone could lead to potential distortions of the marketplace and fail to meet air transportation officials' concerns about the efficient use of national resources and policy makers' concerns about market structure and competitiveness. Future work will enlist the input from both airlines and airports.

Combinatorial auctions using rule-based bids

The migration of auctions to the Internet provides a unique opportunity to harness the power of computing to create new auction forms that were previously impossible. We describe a new type of combinatorial auction that accepts rule-based bids. Allowing bids in the form of high-level rules relieves the buyer from the burden of enumerating all possible acceptable bundles. The allocation of goods requires solving a complex combinatorial problem, a task that is completely impractical in a conventional auction setting. We describe simplifying winner determination heuristics developed in this study to make large problems of this nature manageable.

Guarantees in Auctions: The Auction House as Negotiator and Managerial Decision Maker

The multimillion dollar price guarantees that an auction house can offer for paintings have already had a large impact on auction house profits, and place new demands on the auctioneer's decision making and negotiating skills. Yet auctioneers have not been studied as independent entities and decision makers. To create a price guarantee, the auction house and the seller must negotiate both the guarantee amount and the extra commission the seller pays if the auction price exceeds the guarantee. We present a normative model of negotiations and find the frontier of guarantee and commission that is the Nash bargaining solution. We also determine the optimal reserve that the auctioneer should place on guaranteed property. We find that guarantees decrease the auction house's expected revenue compared to a conventional auction, but do allow it to attract business which might otherwise be lost. Guarantees benefit sellers, increasing the expected value and lowering the variance of their auction revenue. The auctioneer's optimal strategy depends not only on the distribution of the artwork's auction price, but also the price it will bring if it fails to sell at auction. In the latter case the auction house must pay the seller the guarantee and then sell the artwork, which it now owns, in a private secondary market where buyers regard the property as “damaged goods” and lower their offers. Although all points on the frontier produce equal expected revenue, several frequently used decision making rules suggest that both parties may prefer a guarantee arrangement where the seller pays no additional commission and the guarantee has the lowest value on the frontier.

Integrating auction and search markets: The slow Dutch auction

The issue of choosing to sell property by auction or by traditional negotiated search markets is addressed in this article. A general selling institution called the slow Dutch auction is introduced. This general selling mechanism reduces to either a conventional auction, a posted offer, or some time dependent mix of these selling institutions depending on the pricing rule chosen by the seller. We model search by having potential buyers whose private valuation for the property is unknown to the seller arrive randomly over time. With this general framework the seller's problem is to choose a selling mechanism that maximizes expected wealth. Surprisingly, we find that the optimal selling institution is always a posted offer market. The seller chooses an optimal posted price and waits until a buyer arrives who is willing to pay this price. Auctions are never optimal.