Introduction

Online auctions come in many different formats, but most popularly they are either ascending English Auctions, descending Dutch auctions, First-price sealed-bid, Second-price sealed-bid, Vickrey Auctions, or sometimes even a combination of multiple auctions, taking elements of one and forging them with another. The scope and reach of the auctions has been propelled by the internet to a level beyond what the initial purveyors had anticipated ^[1]. This is mainly due to the fact that online auctions break down and remove the physical limitations of traditional auctions such as geography, presence, time, space, and a small target audience ^[1]. This influx in reachability has also made it easier to commit unlawful actions within an auction. In 2002, online auctions were projected to account for 30% of all online e-commerce due to the rapid expansion of the popularity of the form of electronic commerce ^[2].

Types of online auctions

There are four different basic types of online auctions:

English auctions

In live terms, English auctions are where bids are announced by either an auctioneer or by the bidders and winners pay what they bid to receive the object. English auctions are claimed to be the most common form of third-party on-line auction format used in the United States and is deemed to appear the most simplistic of all the forms^[3]. The common operational method of the format is as follows:

Reserved pricing: Users are able to set reserve prices for their auctions which, if not reached, usually results in a no-sale.
Defined time-scale: The seller can set how long the auction is to run for to allow plenty of time for a successful sale.

Dutch auctions

Dutch auctions are the reverse of English auctions whereby the price begins high and is systematically lowered until a buyer accepts the price.

First-price sealed-bid

First-price sealed-bid auctions are when a single bid is made by all bidding parties and the single highest bidder wins, and pays what they bid.

Second-price sealed-bid

Second-price sealed-bid auctions are the same principle as a first-price sealed bid however, the highest bidder and winner will only pay what the second highest bidder had bid.

Legalities

Shill Bidding

Placing fake bids that benefits the seller of the item is known as Shill Bidding. This is a method often used in Online auctions but can also happen in standard Auctions. This is seen as an unlawful act as it unfairly raises the final price of the auction, so that the winning bidder pays more than they should have. If the shill bid is unsuccessful, the item owner needs to pay the auction fees. In 2011, a member of eBay became the first individual to be convicted of shill bidding on an auction ^[4]. By taking part in the process, a individual is breaking the European Union fair trading rules which carries out a fine of up to £5,000 in the United Kingdom ^[5].

References

^ ^a ^b Bapna, R., Goes, P., Gupta, A. 2001. Insights and analysis of online auctions. Communications of the ACM Vol. 44 Issue 11. November 2001
^ Implications of the bidders' arrival process on the design of online auctions. System Sciences, 2000. Proceedings of the 33rd Annual Hawaii International Conference on. Vol. 1. August 2002
^ English Auctions | EpicTech.com Articles
^ "Man fined over fake eBay auctions". BBC. 2010-07-05.
^ "Warning over eBay bidding trick". BBC. 2010-04-20.

[Insights_and_analysis_of_online_auctions-1] Bapna, R., Goes, P., Gupta, A. 2001. Insights and analysis of online auctions. Communications of the ACM Vol. 44 Issue 11. November 2001

[2] Implications of the bidders' arrival process on the design of online auctions. System Sciences, 2000. Proceedings of the 33rd Annual Hawaii International Conference on. Vol. 1. August 2002

[3] English Auctions | EpicTech.com Articles

[4] "Man fined over fake eBay auctions". BBC. 2010-07-05.

[5] "Warning over eBay bidding trick". BBC. 2010-04-20.

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