A Day in the Life of eBay

Mingli Zheng has written an applet that makes it possible to follow the bidding that occurred last June and July on eBay in the market for Pentium 800 mhz processors. This applet illustrates many of the 'strange' features of eBay bidding that have been discussed in the literature. Since the applet shows the alternatives that bidders had available at the times that they chose to bid, it is related to the paper that Sergei Severinov and I have written Internet Auctions with Many Traders. In that paper we analyze an indirect mechanism that resembles the indirect mechanism that is effectively used on eBay.

This note describes how to use the applet, and the data that was used to construct it. If you already know all about it and just want to play around with it, you can directly to the php version, or use Mingli's Java version. Since the Java version runs on your own machine, it is considerable faster than the php version, which makes repeated network calls. The java version requires the java runtime environment. If you haven't got this installed, your browser should point you to the right location when you click on the link. If you don't want the runtime environment or can't install on your machine, then you are stuck with the slower php version.

The Data

The auctions involve sales of used Pentium 800mhz processors. Though the processors were second hand, product quality was probably not an important issue. Processors in this speed range were only introduced in 2000, so none of the processors could have been in service for too long. Many were sold in their original packaging. All of the auctions ended in June or early July of 2001. As is apparent from the applet, the average price at which these things traded was a little over $100US.

The processors were chosen because they are about as close as one can get on eBay to a homogenous commodity. According to the paper with Sergei Severinov that I mentioned above, behavior should be considerably different in auctions where there are many alternatives available, and that is what this dataset was supposed to capture.

For additional information on the dataset, and for some of the econometric analysis that he has done on this and subsequently collected data, refer to Mingli Zheng's work at http://www.chass.utoronto.ca/~mzheng.

A little about eBay

Crudely speaking, eBay consists of a set independently run, ascending second price auctions. Each seller registers his or her product with eBay and sets a starting bid, as well as a possibly secret reserve price. Auctions run for 3, 5, 7, or 10 days (as the seller chooses).

Bidding is carried out on behalf of buyers by a proxy bidder. The exact procedure that the proxy bidder uses to adjust prices is quite difficult to figure out - the ebay website in not particularly helpful in this regard. A description that provides a bit more information, (based on the authors own experiences), is given in the paper by Roth and Ockenfels.

The essential idea is that when buyers submit a 'bid' to the proxy bidder, they are telling the proxy bidder the maximum amount that they are willing to pay. The proxy bidder knows the maximum amount that the current high bidder in any auction has said he is willing to pay. When a new bidder enters his 'bid' into the ebay software, the proxy bidder does one of two things. If the new bid is higher than the maximum amount the current high bidder is willing to pay, then the proxy bidder raises the standing bid in the auction until it is just slightly above the maximum amount the current high bidder is willing to pay. Any new bidder in the auction has to bid above this standing bid.

If the new bidders maximum willingness to pay is less than the maximum amount the current high bidder is willing to pay, then the proxy bidder will raise the standing bid just slightly above this new bidder's value and inform the new bidder that his bid was unsuccessful. In this description 'slightly above' is some amount that depends on the current price in the auction. See http://pages.ebay.com/help/basics/e_bid_conf3.html.

When the bidding stops, the high bidder pays the current standing bid. In effect, the bidder who has submitted the highest bid ends up paying just slightly more than the second highest bidder's bid. (At least according to Roth and Ockenfels. It is surprising how vague all of the auction websites are about exactly how the price you pay is determined).

Some of the special rules that eBay imposes create some problems for the 'second price' interpretation. For example, eBay interprets every bid as an obligation to pay the seller the amount that you bid - it is vague about the exact conditions under which you will be obliged to make this payment. One of the things eBay does explain is that you may be required to pay the seller the amount you bid even if you don't win the auction. Currently eBay recommends that bidders avoid submitting a bid in a second auction until the first auction in which they have bid ends. The reason is that the high bidder might withdraw his or her bid for some legitimate reason, in which case the second high bidder is still committed to the seller.

EBay does not explain what price you would be expected to pay if you won the auction under such circumstances. Newsgroups complain that second high bidders are forced to pay their bid under such circumstances, instead of the third highest bid. You could imagine that this creates pretty strong incentives for sellers to bid in their own auction. Bidders complain about this constantly on eBay newgroups. Of course, eBay forbids sellers bidding on their own behalf, but the practise is pretty hard to detect.

An Example

The example given here illustrates how to read the applet information. On June the 6th, only a single auction ended. The state of the auction at midnight is shown below. The high bid in the auction is given in green. The second high bid, which is the standing bid, is given in red. The high bidder is ernzan at $99.99. Of course no one other than ernzan knows that the bid is $99.99. The standing bid, submitted by evermverm is $90. This bid was sumitted 2 days ago.
Seller
Starts
Sun June 3
@ 13:31:59
ends
Wed June 6
@ 13:31:59
BidderBidTime
evermverm90.00 Mon 12:06:01
evermverm 78.00 Mon 12:05:25
ernzan99.99 Sun 21:08:18
evermverm 65.00 Sun 16:29:51
Bidding next here:
doctorv@msc.net
Add Next
Bid Here
Add Next
Overall Bid
From the bid times in the rightmost column of the table, you can see that evermverm was at one point high bidder, but was displaced by ernzan.

The bottom row of the the table gives some control information. The leftmost cell in the column gives the login name of the person who is next to bid in this auction, doctorv@msc.net. If you click the hyperlink that says "Add Next Bid Here", the page will refresh and if you scroll back to this point in the display, you will find that doctorv's bid has been added to the table.

The new bid will be 'blinking'. Normally, I would agree with you that blinking is very irritating, but in this case it helps to identify the location of the new bid when there are many auctions ending at the same time.

For this auction, the last hyperlink, which says "Add Next Overall Bid", will do exactly the same thing. If you continue to refresh the page, you will eventually be able to see all the bids in this auction. If you want to see what happened in this auction, it is more efficient to go to the php applet and follow the auction from there.

Examples of Bidding Behavior

The auctions illustrate some of the unusual kinds of behavior that have been discussed in the literature. To see some of them try these links.