Online Auctions

Abstract

This chapter is devoted to an in‐depth discussion of online auctions. It begins with a basic description of an online auction and provides examples of some of the largest retail and industrial auctions. Among the topics covered are the online auction leaders, the various types of auctions, how auctions make money based on various types of fees. This is followed by a discussion of the nature of competition in the online auctions industry. We show that competitiveness of the dominant global online auctions is based on economies of scale and scope. New local auctions specializing in localized products and services have begun to enter this industry dominated by global auctions such as eBay and Amazon.com . I compare local auctions to global auction sites to identify the competitive advantages needed to offset the economies of scale. Next, a review of the academic literature on auctions, and particularly online auctions is presented. Afterward is a consideration the transactions costs and bidding behavior that often leads to the “winner's curse.” The conclusion raises the issue of taxing online auctions and discusses the need for new teaching and research approaches.