Cross-bidding in simultaneous online auctions

Online auctiOns have dramatically transfOrmed the way many people trade goods and services on the Internet. This is evident from online auction giant eBay's 2005 year-end figures: over 180 million registered users, 1.9 billion listed auctions (33% increase over 2004), and $44.3 billion worth of transacted merchandise (30% increase over 2004). 6 Online auctions are popular among buyers because they aid in price discovery for hard-to-price products such as used merchandise, enable market-making for geographically dispersed buyers and sellers who cannot otherwise reach each other, and provide buyers with a sense of winning an item instead of purchasing it. For sellers, auctions allow them to move hard-to-sell and perishable products (e.g., vacation rentals) which are often difficult to sell without significant infrastructure, provide the Internet as an alternative and less expensive distribution channel compared to offline means, and extract the most consumer surplus possible in an efficient market. The popularity of the online auction market and evolving variations in the auction format from single-item auctions to multiple-item simultaneous or sequential auctions have motivated bidders to experiment with different bidding strategies. One such strategy is " cross-bidding, " where bidders move between multiple simultaneous auctions of the same product. Given that large auction sites such as eBay often list many units of popular items or " hot sellers " from the same or different sellers at any given instant in time, homogeneity in product quality across different auctions especially for new " in-box " merchandise, and the relative lack of a cost barrier on the part of bidders to compare and switch between these alternate listings, cross-bidding is increasingly becoming a prevalent bidding pattern. However, while some previous studies have examined bidding behaviors and strategies within the context of a single-item auction, 7, 11 very little investigation have focused on simultaneous multi-unit auctions 1 or examined the efficacy of newer bidding strategies such as cross-bidding. The goal of this paper is to provide greater insights into the cross-bidding phenomena and thereby, improve our understanding of this emerging bidding strategy in simultaneous online auctions. More specifically, we seek to answer the following questions: what proportion of online auction bidders engage in cross-bidding, how many simultaneous auctions do cross-bidders participate in, what is the success rate of cross-bidders in winning online auctions , how do the closing prices for cross-bidders differ from those of traditional bidders, and how do cross-bidders differ from traditional …