1. Snipers, Shills, and Sharks Ken Steiglitz Princeton University Press, 2007

2. Find the treasure!

3. A bronze coin from Tyre, Phoenicia, under the reign of Valerian I, 253-260 AD. Dido stands left holding sceptre and cubit rule; to the left a mason working on the top of a gateway, below a man digging with a pick.

4. Neapolis, Samaria, Mt. Gerazim, supported by eagle, under Trebonius Gallus, 251-3 AD

5. Gaba, Trachonitis, Coele-Syria, Ant. Pius, 138-161 AD, tetrastyle temple with three arches above, within, turreted city goddess wearing long chiton, hldg. long standard in r. hand, cornucopiae in left, crowned by Nike on pedestal to r.; in ex.:  ABHN  N,

7. The nineteenth-century art expert Edmond Bonnaffe’ is reported to have observed that "after Michelangelo's pictures and the Medici porcelain "after Michelangelo's pictures and the Medici porcelain the rarest thing he had ever seen among collectors was the rarest thing he had ever seen among collectors was goodwill, and he drew the conclusion that collectors‘ mania embraced the desire to own things for oneself, goodwill, and he drew the conclusion that collectors‘ mania embraced the desire to own things for oneself, the desire to own them for others, and the desire to stop other people owning anything." the desire to own them for others, and the desire to stop other people owning anything." M. Rheims, "The Strange Life of Objects: 35 Centuries of Art Collecting", Atheneum Publishers, New York, 1961, (Translated from the French by D. Pryce-Jones)

8. Three questions, three levels Why is eBay so successful? Why is eBay so successful? What is the received theory of auctions? What is the received theory of auctions? How well does the theory work in predicting human behavior? How well does the theory work in predicting human behavior?

9. Why is eBay so successful? The mechanism: Not the most obvious way to run an online auction! The mechanism: Not the most obvious way to run an online auction! 1) Winner pays second-highest bid 2) At any point, next-highest bid is posted 3) Bidding ends at a fixed time

10. A trusted third party Transparency engenders trust… and can invite interlopers: eBay treads the line Transparency engenders trust… and can invite interlopers: eBay treads the line Recent compromises: bidder ID’s Recent compromises: bidder ID’s 1) anonymized after bids reach $200 1) anonymized after bids reach $200 2) can no longer search by bidder for active auctions 2) can no longer search by bidder for active auctions

11. Theoretical roots: William Vickrey Wins Nobel prize 1996 Wins Nobel prize 1996 1961 paper proposes 2 nd -price auctions, now called “Vickrey auctions” 1961 paper proposes 2 nd -price auctions, now called “Vickrey auctions”

12. Plus John Nash Equilibrium behavior: translates human behavior to a mathematical condition Equilibrium behavior: translates human behavior to a mathematical condition Bidding one’s private value is dominant Bidding one’s private value is dominant Wins Nobel prize, 1994

13. The lay of the theoretical land

14. Most naïve theory Bid your private value Bid your private value Sit back and relax… Sit back and relax… In this context, eBay is a Vickrey auction In this context, eBay is a Vickrey auction This is eBay’s “proxy bidding” Hopelessly naïve

15. Early bidding vs. Sniping But early bidding affects behavior But early bidding affects behavior WAR

16. Dangers of early bidding, con’t As bait

17. Dangers of early bidding, con’t Curiosity

18. The internet as a laboratory a goldmine of data Empirical studies are proliferating Empirical studies are proliferating They augment laboratory experiments They augment laboratory experiments They augment theory They augment theory Typical studies: Typical studies: 1) Hossain & Morgan 2003: Test of revenue equivalence 2) Katkar & Lucking-Reiley 2000: Is a secret reserve a good idea?

19. General conclusions: very basic economics Buyers should try to decrease competition: bid late, lay low, hide expertise; i.e., snipe Buyers should try to decrease competition: bid late, lay low, hide expertise; i.e., snipe Sellers should try to increase competition: use low opening bids, avoid secret reserves if possible, be nice to buyers! Sellers should try to increase competition: use low opening bids, avoid secret reserves if possible, be nice to buyers! eBay’s interests generally align with sellers eBay’s interests generally align with sellers

20. Some recent empirical results Bidders snipe more often on collectibles -- more incentive to hide interest and expertise Bidders snipe more often on collectibles -- more incentive to hide interest and expertise Buyers tend to overlook somewhat higher shipping costs Buyers tend to overlook somewhat higher shipping costs Bidders tend to avoid items with secret reserves Bidders tend to avoid items with secret reserves Bidders tend to prefer auctions with many bidders (herding behavior) Bidders tend to prefer auctions with many bidders (herding behavior)

23. The dark side Shills Shills Shadowing bidders Shadowing bidders Exporting and importing cultural artifacts Exporting and importing cultural artifacts Fakes Fakes Rings (bidder collusion)? Rings (bidder collusion)?

24. A (likely) shill Bidder 3 bids $94 when the reserve is $95 and the high bid is below that. She has feedback of 1. A likely shill. Bidder 3 bids $94 when the reserve is $95 and the high bid is below that. She has feedback of 1. A likely shill. Reserve = $95 ______