| An online auction is a portal in which participants bid for | | | | number of listed items (ie.: number of sellers) and the |
| products and services over the Internet. The | | | | number of bids for each item (ie.: number of bidders). |
| functionality of buying and selling in an auction format is | | | | The items do not need to be shipped to a central |
| made possible through auction software which | | | | location, reducing costs, and reducing the seller's |
| regulates the various processes involved.eBid, one of | | | | minimum acceptable price. |
| the the world's largest online auction site, is one of the | | | | 3. Intensity of social interactions. The social interactions |
| better known examples. Like most auction companies, | | | | involved in the bidding process are very similar to |
| eBid does not actually sell goods that it owns itself. It | | | | gambling. The bidders wait in anticipation hoping they |
| merely facilitates the process of listing and displaying | | | | will "win." Much like gambling addiction, some bidders |
| goods, bidding on items, and paying for them. It acts as | | | | may bid primarily to "play the game" rather than to |
| a marketplace for individuals and businesses who use | | | | obtain products or services. This creates a highly loyal |
| the site to auction off goods and services.eBid | | | | customer segment. |
| operates in ten countries, United Kingdom, United | | | | 4. Large number of bidders. Because of the potential |
| States of America, Canada, Australia , Ireland, Italy, | | | | for a relatively low price, the broad scope of products |
| France, Germany, Spain, Netherlands. eBid uses its | | | | and services available, the ease of access, and the |
| own online payment service PPPay to allow for | | | | social benefits of the auction process, there are a |
| buyers and sellers to pay each other in Euros and | | | | large numbers of bidders. |
| Pounds Sterling, although members are not restricted | | | | 5. Large number of sellers. Because of the large |
| to using this form of payment. | | | | number of bidders, the potential for a relatively high |
| Unlike eBay, listing a basic auction on eBid is free and a | | | | price, reduced selling costs, and ease of access, there |
| small percentage final value fee is paid on selling your | | | | are a large number of sellers. |
| item. | | | | 6. Network economies. The large number of bidders |
| The advantages of using eBid to sell your goods | | | | will encourage more sellers, which, in turn, will |
| include: | | | | encourage more bidders, which will encourage more |
| 1. No time constraints. Bids can be placed at any time | | | | sellers, etc., in a virtuous circle. The more the circle |
| (24/7). Items are listed for a number of days (usually | | | | operates, the larger the system becomes, and the |
| between 1 and 10, at the discretion of the seller), giving | | | | more valuable the business model becomes for all |
| purchasers time to search, decide, and bid. This | | | | participants. |
| convenience increases the number of bidders. | | | | 7. Captures consumers' surplus. Auctions are a form |
| 2. No geographical constraints. Sellers and bidders can | | | | of first degree price discrimination. As such, they |
| participate from anywhere that has internet access. | | | | attempt to convert part of the consumers' surplus |
| This makes them more accessible and reduces the | | | | (defined as the area above the market price line but |
| cost of "attending" an auction. This increases the | | | | below the firm's demand curve) into producers' surplus. |