Price formation and its dynamics in online auctions

This research uses functional data modelling to study the price formation process of online auctions. It conceptualizes the price curve and its first and second derivatives (velocity and acceleration respectively) as the primary objects of interest. Together these three functional objects permit us to talk about the energy of an auction, and how the influence of its determinants vary as a function of auction time. For instance, we find that the incremental impact of an additional bidder's arrival on the rate of price increase is smaller towards the end of the auction. Our analysis suggests that "stakes" do matter and that the rate of price increase is faster for more expensive items, especially at the start and the end of an auction. It is observed that higher seller ratings (which correlate with experience) positively influence the price dynamics, but the effect is weaker in auctions with longer durations. Interestingly, we find that the price level is negatively relat...

• Type: Journal
• Year: 2008
• Where: DSS
• Authors: Ravi Bapna, Wolfgang Jank, Galit Shmueli
• Keywords: Auction, DSS 2008, Price Formation Process, Price Increase