1 Teck-Hua Ho April 15, 2006 A Taxonomy of Ascending Bid Auctions Is Auction’s Duration/Deadline Fixed? Buyers Place a Bid By YesNo Automatic Bidding Straight Bidding eBay Offline English Auction

2 Teck-Hua Ho April 15, 2006 Simulated Auction Experiment I. Economic and Behavioral Foundations of Pricing II. Innovative Pricing Concepts and Tools III. Internet Pricing Models

3 Teck-Hua Ho April 15, 2006 Simulated Auction Market  Open English auction ( ).  An auction market labeled as Travel.  Each of you will be assigned to a group and the market has 12 groups of participants.  Each group will participate in the auction market for 6 rounds.  Each group will be a seller once and a buyer 5 times. AUCTION

4 Teck-Hua Ho April 15, 2006 Group Assignment  Each project group will be given an user-id and password to login to the system.  This information will be notified via an envelope to the group.  When you login to the system, you will be provided with information about your cost as a seller and WTP as a buyer. Do not reveal this information to anyone!

5 Teck-Hua Ho April 15, 2006 Auction Market Design  In each auction round, there will be 2 sellers and 10 buyers.  Your role in each auction round will be communicated to you via a table when you login to the system.  Each auction round runs for 5 minutes after the sellers list their items.  Sellers can submit a reserve price below which the item will not be sold to any buyer.  If a bid is submitted within 1 minute of the closing time of an auction, the auction will be extended automatically for another 1 minute from the time the bid was submitted.

6 Teck-Hua Ho April 15, 2006 Seller’s Cost & Buyer’s Willingness-to-Pay (WTP)  In each auction round, each seller attempts to sell an airline ticket for SIN-SFO  Each seller’s cost can range from $1 to $30 and is randomly determined.  Each buyer’s WTP can range from $1 to $1000 and is randomly determined.  Again, the table on the screen (when you login to the system) assigning your role in each round also contains either your cost or WTP.  You are not to reveal this information to anyone. It is private information.

7 Teck-Hua Ho April 15, 2006 Listing Item and Submitting Bids  Sellers should list their item as soon as Teck announces the following message “This is round X. Sellers list your items now”.  Sellers should use a unique name as the respective listing title of the ticket.  Sellers are not supposed to bid on any item.  Buyers may submit bids to any seller.  Buyers should monitor their bids closely and submit new bids if others outbid them and they wish to increase their bids.

8 Teck-Hua Ho April 15, 2006 Seller’s and Buyer’s Earnings  If you are a seller, and you were able to make a sale, your Earnings = Highest Bid - Cost. Otherwise, your Earnings = - Cost (i.e., any unsold ticket has zero value at the end of the auction period)  If you are a buyer, and you were able to win a ticket, your Earnings = WTP - Bid. If you submit bids to 2 sellers and happen to win both tickets, your Earnings = WTP - Bid 1 - Bid 2 (i.e., you have zero value for the second ticket). Otherwise, your Earnings = 0.

9 Teck-Hua Ho April 15, 2006 Summary  URL for auction simulation software: (  Userid: group6; Password: ????????  You will participate in E-Market Travel for six rounds. You will be a seller once and a buyer five times.

10 Teck-Hua Ho April 15, 2006 Sample Table Your WTP/Cost Assignments Round RoleSellerBuyer WTP/Cost$15.00$355.00$561.00$689.00$930.00$ Do you let anyone look at this information!!!

11 Teck-Hua Ho April 15, 2006 Deciding the Winner  Each group’s total earnings is the sum of its earnings either as a seller or a buyer in all six auction rounds  The group who has the highest total earnings will win  Thus, your goal is to make as much money as possible (hopefully not a new idea)

12 Teck-Hua Ho April 15, 2006 The Auctions Begin Now