Information asymmetries in pay-per-bid auctions

Recently, some mainstream e-commerce web sites have begun using “pay-per-bid” auctions to sell items, from video games to bars of gold. In these auctions, bidders incur a cost for placing each bid in addition to (or sometimes in lieu of) the winner’s final purchase cost. Thus even when a winner’s purchase cost is a small fraction of the item’s intrinsic value, the auctioneer can still profit handsomely from the bid fees. Our work provides novel analyses for these auctions, based on both modeling and datasets derived from auctions at Swoopo.com, the leading pay-per-bid auction site. While previous modeling work predicts profit-free equilibria, we analyze the impact of information asymmetry broadly, as well as Swoopo features such as bidpacks and the Swoop It Now option specifically. We find that even small asymmetries across players (cheaper bids, better estimates of other players’ intent, different valuations of items, committed players willing to play “chicken”)...

• Type: Conference
• Year: 2010
• Where: SIGECOM
• Authors: John W. Byers, Michael Mitzenmacher, Georgios Zervas
• Keywords: Auctions, ECommerce, Purchase Cost, SIGECOM 2010, Winner’s final Purchase