|dc.description.abstract||This dissertation, which consists of three essays, studies online auctions both
theoretically and empirically.
The first essay studies a special online auction format used by eBay, “Buy-It-
Now” (BIN) auctions, in which bidders are allowed to buy the item at a fixed BIN
price set by the seller and end the auction immediately. I construct a two-stage
model in which the BIN price is only available to one group of bidders. I find that
bidders cutoff is lower in this model, which means, bidders are more likely to accept
the BIN option, compared with the models assuming all bidders are offered the BIN.
The results explain the high frequency of bidders accepting BIN price, and may also
help explain the popularity of temporary BIN auctions in online auction sites, such
as eBay, where BIN option is only offered to early bidders.
In the second essay, I study how bidders’ risk attitude and time preference affect
their behavior in Buy-It-Now auctions. I consider two cases, when both bidders enter
the auction at the same time (homogenous bidders) thus BIN option is offered to both
of them, and when two bidders enter the auction at two different stages (heterogenous
bidders) thus the BIN option is only offered to the early bidder. Bidders’ optimal
strategies are derived explicitly in both cases. In particular, given bidders’ risk attitude and time preference, the cutoff valuation, such that a bidder will accept BIN if
his valuation is higher than the cutoff valuation and reject it otherwise, is calculated.
I find that the cutoff valuation in the case of heterogenous bidders is lower than that
in the case of homogenous bidders.
The third essay focuses on the empirical modeling of the price processes of online
auctions. I generalize the monotone series estimator to model the pooled price
processes. Then I apply the model and the estimator to eBay auction data of a palm
PDA. The results are shown to capture closely the overall pattern of observed price
dynamics. In particular, early bidding, mid-auction draught, and sniping are well
approximated by the estimated price curve.||en_US