1. Dynamic Trading: E-Auctions, Bartering, and Negotiations

2. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 1.Define the various types of e-auctions and list their characteristics. 2.Describe forward and reverse auctions. 3.Describe the benefits and limitations of e- auctions. 4.Describe some unique e-auction models. 5.Describe the various services that support e- auctions. 17-1

3. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6.Describe bartering and negotiating. 7.Describe the hazards of e-auction fraud and discuss possible countermeasures. 8.Describe e-auction deployment and implementation issues. 9.Analyze mobile auctions and future directions of e-auctions. 17-2

4. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall auction Market mechanism by which buyers make bids and sellers place offers; characterized by the competitive and dynamic nature by which the final price is reached – electronic auctions (e-auctions) Auctions conducted online – dynamic pricing Fluctuating prices that are determined based on supply and demand relationships at any given time 17-3

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6. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall ONE BUYER, ONE SELLER ONE SELLER, MANY POTENTIAL BUYERS (FORWARD AUCTIONS) – forward auction An auction in which a seller offers a product to many potential buyers 17-5

7. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall – sealed-bid auction Auction in which each bidder bids only once; a silent auction, in which bidders do not know who is placing bids or what the bid prices are – Vickrey auction Auction in which the highest bidder wins but pays only the second highest bid 17-6

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9. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall ONE BUYER, MANY POTENTIAL SELLERS – reverse auction Auction in which the buyer places an item for bid (tender) on a request for quote (RFQ) system; potential suppliers bid on the job, with bid price reducing sequentially, and the lowest bid wins; used mainly in B2B and G2B e-commerce – B2B Reverse Auctions 17-8

10. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall – C2C Reverse Auctions “name-your-own price” model Auction model in which would-be buyers specify the price (and other terms) they are willing to pay to any willing seller; a C2B model pioneered by Priceline.com MANY SELLERS, MANY BUYERS – vertical auction Auction that takes place between sellers and buyers in one industry or for one commodity – auction vortals Another name for a vertical auction vertical portal 17-9

11. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall BENEFITS OF E-AUCTIONS – Benefits to Sellers Larger reach and increased revenues Optimal price setting Removal of expensive intermediaries Liquidation Lower transaction costs Lower administrative costs Better customer relationships 17-10

12. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall – Benefits to Buyers Opportunities to find unique items and collectibles Lower prices Anonymity Convenience Entertainment – Benefits to E-Auctioneers Higher repeat purchases A stickier Web site Expansion of the auction business 17-11

13. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall LIMITATIONS OF E-AUCTIONS – Possibility of fraud – Limited participation – Security – Auction software – Long cycle time – Monitoring time – Equipment for buyers – Order fulfillment costs 17-12

14. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall STRATEGIC USES OF AUCTIONS AND PRICING MECHANISMS AUCTIONS FOR PUBLICITY 17-13

15. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall The “name-your-own-price” model, pioneered by Priceline.com enables consumers to achieve significant savings by naming their own price for goods and services The concept is that of a C2B reverse auction, in which vendors bid on a job by submitting offers and the lowest priced vendor or the one that meets the buyer’s requirements gets the job The buyer can place a request for travel or even housework they need done 17-14

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17. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall PHASE 1: SEARCHING AND COMPARING – Auction Aggregators and Notification – Browsing Site Categories – Basic and Advanced Searching PHASE 2: GETTING STARTED AT AN AUCTION – Registration and Participants’ Profiles Listing and Promoting – Pricing 17-16

18. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall PHASE 3: BIDDING – Bid Watching and Multiple Bids – sniping Entering a bid during the very last seconds of an auction and outbidding the highest bidder – proxy bidding Use of a software system to place bids on behalf of buyers; when another bidder places a bid, the software (the proxy) will automatically raise the bid to the next level until it reaches the buyer’s predetermined maximum price 17-17

19. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall PHASE 4: POSTAUCTION FOLLOW-UP – Postauction Actions Bidding notifications End-of-auction notices Seller notices Postcards and thank-you notes 17-18

20. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall PHASE 4: POSTAUCTION FOLLOW-UP – User Communication Chat groups Mailing lists Message boards – Feedback and Ratings – Invoicing and Billing – Payment Methods P2P transfer service Escrow service Credit card payment – Shipping and Postage 17-19

21. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall ADDITIONAL TERMS AND RULES – Bid retraction – Featured auctions – Other Services 17-20

22. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall single auction Auction in which at least one side of the market consists of a single entity (a single buyer or a single seller) 17-21

23. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall double auction Auction in which multiple buyers and sellers may be making bids and offers simultaneously; buyers and their bidding prices and sellers and their asking prices are matched, considering the quantities on both sides 17-22

24. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall bundle trading The selling of several related products and/or services together PRICES IN AUCTIONS: HIGHER OR LOWER? – Pricing Strategies in Online Auctions 17-23

25. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall bartering The exchange of goods and services – electronic bartering (e-bartering) Bartering conducted online, usually by a bartering exchange – Consumer-to-Consumer Barter Exchanges 17-24

26. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall NEGOTIATION AND BARGAINING – online negotiation A back-and-forth process of bargaining until a buyer and seller reach a mutually agreeable price – P2P Online Negotiations 17-25

27. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall – Technologies for Electronic Bargaining 1.Search 2.Comparison and selection 3.Negotiation 4.Continuing selection and negotiation 5.Transaction completion 17-26

28. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall TYPES OF E-AUCTION FRAUD – bid shielding Having phantom bidders bid at a very high price when an auction begins; they pull out at the last minute, and the real bidder who bid a much lower price wins – Shilling – Fake Photos and Misleading Descriptions – Improper Grading Techniques – Bid Siphoning 17-27

29. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall – Selling Reproductions as Originals – Failure to Pay – Failure to Pay the Auction House – High Shipping Costs and Handling Fees – Failure to Ship Merchandise – Loss and Damage Claims – Fake Escrow Services – Switch and Return – Other Frauds 17-28

30. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall PROTECTING AGAINST E-AUCTION FRAUD – User Identity Verification – Authentication Service – Grading Services – Insurance Policy – Escrow Services – Nonpayment Punishment 17-29

31. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall – Appraisal Services – Physical Inspection – Item Verification – Buyer Protections – Spoof (Fraudulent) Web Site Protection – eBay Security Center – Feedback Forum and Analysis 17-30

32. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall USING INTERMEDIARIES – Trading Assistants AUCTION RULES STRATEGIC ISSUES AUCTIONS IN B2B EXCHANGES 17-31

33. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall INFRASTRUCTURE FOR E-AUCTIONS – Building Auction Sites AUCTIONS ON PRIVATE NETWORKS – Pigs in Singapore and Taiwan – Livestock Auctions in Australia 17-32

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37. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall BENEFITS AND LIMITATIONS OF MOBILE AUCTIONS – Benefits Convenience and ubiquity Privacy Simpler and faster – Limitations Visual quality Memory capacity Security 17-36

38. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall THE FUTURE OF E-AUCTIONS – Global Auctions – Wireless Auctions – Selling Art Online in Real-Time Auctions – Strategic Alliances 17-37

39. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 1.Should we have our own auction site or use a third-party site? 2.What are the costs and benefits of auctions? 3.What auction strategies would we use? 4.What about support services? 5.What would we auction? 6.What is the best bartering strategy? 7.How can we promote our auction? 8.Should we combine auctions with other models? 17-38