A Taxonomy of Ascending Bid Auctions

1. A Taxonomy of Ascending Bid Auctions Is Auction’s Duration/Deadline Fixed? Yes No Offline English Auction Straight Bidding Buyers Place a Bid By Automatic Bidding eBay http://auctions.yahoo.com/phtml/auc/us/bidder/bid.html http://help.yahoo.com/help/us/auct/asell/asell-19.html

2. Simulated Auction Experiment I.Economic and Behavioral Foundations of Pricing II. Innovative Pricing Concepts and Tools III. Internet Pricing Models

3. Simulated Auction Market • Open English auction (http://groups.haas.berkeley.edu/simulations/ ). • 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. 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. 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. http://auctions.yahoo.com/phtml/auc/us/tour/index.html

6. 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. 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. 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. Summary • URL for auction simulation software: (http://groups.haas.berkeley.edu/simulations) • 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. Your WTP/Cost Assignments Round 1 2 3 4 5 6 Role Seller Buyer Buyer Buyer Buyer Buyer WTP/Cost $15.00 $355.00 $561.00 $689.00 $930.00 $475.00 Sample Table Do you let anyone look at this information!!!

11. 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. The Auctions Begin Now http://groups.haas.berkeley.edu/simulations/