Online auctions

The online auction business model is one in which participants bid for products and services over Internet. When one thinks of online auctions they typically think of eBay, the world's largest online auction site. Like most auction companies, eBay does not actually sell goods that it owns itself. It merely facilitates the process of listing and displaying goods, bidding on items, and paying for them. It acts as a marketplace for individuals and businesses that use the site to auction off goods and services.

While there is no denying the increasing popularity of online auctions, consumers should be aware of the problems that can arise if they do not exercise the same caution online auctions they apply to physical world transactions.

Auction transactions processed through an online payment service, such as Pay Pal, sometimes can be resolved through your credit card company and/or the online payment service. If you have experienced a problem with your auction purchase, in addition to notifying the online auctions site, you should immediately bring the issue to the attention of these companies. First call and then follow up with written notification within sixty days of the billing date. If the dispute is more than sixty days old, you should explain the delay.

Several types of online auctions are possible. In an English auction the initial price starts low and is bid up by successive bidders. In a Dutch auction, multiple identical items are offered in one auction, with all winning bidders paying the same price -- the highest price at which all items will be sold (treasury bills, for example, are auctioned this way). Almost all online auctions use the English auction method.

The strategic advantages of this business model include:

No time constraints:

Bids can be placed at any time (24/7). Items are listed for a number of days (usually between 1 and 10, at the discretion of the seller), giving purchasers time to search, decide, and bid. This convenience increases the number of bidders.

No geographical constraints. Sellers and bidders can participate from anywhere that has internet access. This makes them more accessible and reduces the cost of "attending" an auction. This increases the number of listed items (i.e. number of sellers) and the number of bids for each item (i.e. number of bidders). The items do not need to be shipped to a central location, reducing costs, and reducing the seller's minimum acceptable price.

Intensity of social interactions:

The social interactions involved in the bidding process are very similar to gambling. The bidders wait in anticipation hoping they will "win" (eBay calls the successful bidder the "winner.") Much like gambling addiction, many bidders bid primarily to "play the game" rather than to obtain products or services. This creates a highly loyal customer segment for companies like eBay.

Large number of bidders:

The potential for a relatively low price, the broad scope of products and services available, the ease of access, and the social benefits of the auction process, there are a large numbers of bidders because of this, the potential for a relatively high price, reduced selling costs, and ease of access, there are a large number of sellers.

Network economies:

The large number of bidders will encourage more sellers, which, in turn, will encourage more bidders; result will be more sellers, etc. in a virtual spiral. The more the spiral operates, the larger the system becomes, and the more valuable the business model becomes for all participants.

Captures consumers' surplus:

Auctions are a form of first degree price discrimination. As such, they attempt to convert part of the consumers' surplus (defined as the area above the market price line but below the firm's demand curve) into producers' surplus.

Private Disputes:

Please be aware that if your complaint is a private dispute, between you and another individual, our office cannot assist you through our mediation program. You may wish to discuss this matter with a private attorney. This office cannot represent individual consumers in court or give individual legal advice.

If you need a referral in New York State, you may contact the New York State Bar Association's Lawyer Referral and Information Service at (800) 342-3661, Monday through Friday, from 9:30 a.m. to 4:00 p.m. Lawyers participating in the Service have agreed to provide an initial consultation of up to one-half hour for a $25.00 fee. Additional information regarding this service is also available through the New York State Bar Association website. Alternatively, you may contact your local county bar association for referral information.

Small Claims Courts are the most convenient forums in which to file suit. In New York State, you may sue for up to $3,000 plus interest and court costs. Also in New York State, you must file a small claims suit in the county where the defendant resides, is employed or has an office. An attorney may represent you but is not required.

And here is little success story of eBay many people must be interested to know e-Bay is the online auction site was founded in San Jose, California on September 4, 1995 by computer programmer Pierre Omidyar as Auction Web,[1] part of a larger personal site that included, among other things, Omidyar's own tongue-in-cheek tribute to the Ebola virus.

One of the early items sold on eBay was Omidyar's broken laser pointer for $13.83. Astonished, he contacted the winning bidder and asked if he understood that the laser pointer was broken. In his responding email, the buyer explained: "I'm a collector of broken laser pointers.

Chris Agarpao was hired as eBay's first employee and Jeff Skoll was hired as the company's first president in 1996. In November 1996, eBay entered into its first third-party licensing deal, with a company called Electronic Travel Auction to use Smart Market Technology to sell plane tickets and other travel products. The company officially changed the name of its service from Auction Web to eBay in September 1997. Originally, the site belonged to Echo Bay Technology Group, Omidyar's consulting firm. Omidyar had tried to register the domain name EchoBay.com but found it already taken by the Echo Bay Mines, a gold mining company, so he shortened it to his second choice, eBay.com.

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