Auctions on the internet represent one of the most interesting development in electronic commerce. In this paper, I surveyed the characteristics of internet auction, types of auction goods and auction formats. Also, with the growing importance of mult...
Auctions on the internet represent one of the most interesting development in electronic commerce. In this paper, I surveyed the characteristics of internet auction, types of auction goods and auction formats. Also, with the growing importance of multi-unit auctions, I surveyed the recent theory of demand reduction incentive which creates an inefficiency in multi-unit auctions. The facts that large bidders have an incentive to reduce demand in order to pay less for their winnings and bidders who reduce demand for additional units sometimes lose to smaller bidders with lower values reveal that these demand reduction could be happened in the real internet auctions.
To test the theoretical prediction about demand reduction in multi-unit auctions, I ran field experiment using both the Vickrey and the Uniform price sealed bid auction formats.
Field data yield several important findings. First, demand reduction is evident in the uniform price auctions, relative to the Vickrey auctions. Second, the amount of demand reduction is large: the uniform-price auction results in significantly more bids of zero, and the bid reductions are large enough to cause frequent changes in the allocation of goods.
I hope to see these results replicated and extended to more complicated environments such as increased number of bidders and goods.