"Stop shilling by killing auctions"

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Researchers at the University of Southampton have come up with what they call a solution to shill bidding on online auction sites. Currently, the lower an item’s start price, the lower the fees to list it. This, they say, encourages sellers to save money on listing fees and then shill bid to raise the price to an acceptable level.

They propose a restructuring of fees, so that the auction site would take a percentage of the difference between the opening bid price and the final sale price. This, claim the researchers, would put an end to fee-avoiding low starts, and incentivise realistic opening prices. With their minimum price guaranteed, no one would need to shill bid to ensure they got their minimum price for their item.

I think this research has got the nature of much shill bidding wrong. The high profile bidancient case might have been about using shilling to achieve an acceptable minimum price, but in general, shilling is much more likely to stem from emotional greed and opportunism: a seller seeing that a bid can be pushed higher. It’s about achieving more profit, rather than achieving an acceptable price in the first place. (Or so I guess: feel free to comment…!)

The researchers claim to be “at the forefront of auction mechanism research”, but one is left wondering if those making these naive proposals have actually ever used the site. What many people love about eBay – not least those in San José who want a return to “core” auction business on the site – is the low start, the thrill of a bargain, the excitement for sellers seeing their prices rise. Under the researchers’ proposals, every auction would be a Buy It Now: start price £9.99, BIN £10… what’s the point of the auction format any more? Where has the excitement gone? eBay becomes just another flat-fee marketplace.

This idea would hurt buyers: no more auction bargains. It would hurt sellers: higher start prices make for lower sell-through rates, less enthusiastic buyers and slower turnover. It would hurt eBay too, killing off one of their unique selling points. Remember, your taxes are funding this kind of spurious research. 🙄

3 Responses

  1. Interesting that it was the University of Southampton. I think they may still run a fine art auctioneering and valuation course that is accredited by some of the UK’s big auction houses and RICS.

    The UK auction system uses hidden reserves (The buyer will not know there is a reserve on an item). The Auctioneer will also be using proxy bids (Left bids) as well as live bids. You may have heard the term “taking bids from the chandelier” where there is only one or sometimes nobody bidding live in the auction (Yes, the auctioneer pretends to take bids from inanimate objects). This allows the sale price to achieve an acceptable level! And of course this is not shilling in the UK. Nobody in the UK had heard of the ebay term “shilling” . Over here it we had twenty shillings to a pound. 🙂

    The serious point is that this system of hidden reserves doesn’t put bidders off from bidding for an item in the first place. So there would still be the excitement. There still would be some bargains as the seller would still hope to actually sell the item and not run up listing fees. Ebay could also make a killing by charging a reasonable FVF for reserves . 🙁

    It’s all about a balance of pricing. Too many bargains, and the sellers won’t bother to list. Too high a price will kill off the buyers. The UK auction houses have been using the system for over 250 years and are still here.

  2. It’s an odd study that does, as is rightly pointed out, misunderstand much of the eBay bidding psychology.

    Not only only, imho, is shill bidding much less prevalent on eBay as seems popularly assumed, it is correctly taken as read that ‘ringing’ is endemic in real life auctions.

    At the end of the day, on eBay, you only pay what you want to pay. Just place that max bid and let the market do its work. Noone is making you pay more than your top price.


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