Ken Steiglitz

Miscellaneous blog-like stuff

January 9, 2008:       A sniper with a machine gun

The following activity appeared on eBay Dec 3, 2007. Closing time was 15:40:00, and the winning bid was the three-second snipe by X**X (eBay did not anonymize the winner, but I do here.) 
>  Bidder Bid Amount Bid Time
> 
>  X**X ( 529)    US $422.00 Dec-03-07 15:39:57 PST
>  a***t( 94)     US $417.00 Dec-03-07 15:39:56 PST
>  a***t( 94)     US $412.00 Dec-03-07 15:39:55 PST
>  a***t( 94)     US $407.00 Dec-03-07 15:39:54 PST
>  a***t( 94)     US $402.00 Dec-03-07 15:39:52 PST
>  a***t( 94)     US $397.00 Dec-03-07 15:39:51 PST
>  a***t( 94)     US $392.00 Dec-03-07 15:39:43 PST
>  a***t( 94)     US $387.00 Dec-03-07 15:39:41 PST
>  a***t( 94)     US $382.00 Dec-03-07 15:39:33 PST
>  a***t( 94)     US $377.00 Dec-03-07 15:39:31 PST
>  a***t( 94)     US $372.00 Dec-03-07 15:39:28 PST
>  a***t( 94)     US $367.00 Dec-03-07 15:27:50 PST
>  a***t( 94)     US $362.00 Nov-30-07 20:00:08 PST
>  6***6( 404)    US $350.00 Nov-29-07 09:35:24 PST
>  a***t( 94)     US $303.00 Nov-28-07 04:28:58 PST
>  r***n( 94)     US $201.00 Nov-27-07 22:17:33 PST
>  a***t( 94)     US $200.00 Nov-27-07 11:27:29 PST
>  3***o( 35)     US $101.00 Nov-26-07 17:45:20 PST
>  d***m( 7 )     US $52.00  Nov-26-07 17:11:29 PST
>  Starting Price US $0.99   Nov-26-07 15:40:00 PST
What surprises me is the final blast of 11 bids by a***t, some only one second apart, and all $5.00 apart (eBay's bidding increment in this range). This was probably done with sniping software, but it's possible that 11 windows were opened up and the forms filled out in advance. But why would anyone do this? Here are two possible explanations:

1. Intimidation. Such repeated bids by the current high bidder might be meant to scare away competitors by suggesting that she is raising her bid very high above the current posted price. Moreover, this mechanized barrage for the last 30 seconds may also be meant to confuse as well as intimidate competitors.

2. Advertizing. Such repeated bids might be used by the seller to raise the total number of bids on the item, and so attract attention to the item---a motive exactly opposite to intimidation. But I think this would only make sense earlier in the auction.

The first explanation seems more convincing to me than the second. Any other suggestions?

October 31, 2007:       ebay's transparency: The weather clears a bit

It is once again possible to search by bidder on auctions that are still active. Thanks to Jon Edwards for pointing this out to me. There is an advantage and disadvantage to eBay in allowing this "shadowing," and I can only speculate on their motivation for first allowing the option, then turning it off, and then restoring it.

The visibility of bidders is clearly a deterrent to shill bidding by sellers---and allowing them to be seen even before the close of an auction is more of a deterrent than allowing them to be seen only after the close. However, this makes it possible for interlopers to send offers of competing sales to early bidders before the close of an auction, and eBay was evidently trying to crack down on this interference when they turned off the option. That was around the beginning of 2007. Apparently the balance tipped the other way, and it was felt best to restore the option. It means that once again, some bidders can ride on the shoulders of others, trying to take advantage of their search time and expertize.

Another reason not to bid early!
September 26, 2007       The ethics of finding an equilibrium

Bidder rings, or any form of explicit collusion between bidders to reduce competition in an auction, are generally illegal, certainly unethical, and against eBay's rules. I recently mentioned the phenomenon to a lawyer, at a cocktail party, and he immediately came back with the suggestion that bidders could form an LLC and bid collectively, presumably disbursing won items in some way to the LLC's officers. When I mentioned this to Ed Felten, he suggested that this might be an illegal restraint of trade. These exchanges got me thinking about just where and how a line can be drawn. For example, can a corporation enter a bid to an auction house like Sotheby's? The rules I've seen in auction catalogs mention "buyer" and "bidder" without definition. What rules would then govern the dispersal by the corporation of items that it wins at auction? Can it auction them off to members of the corporation, thus functioning as a legally incorporated ring? Don't agents of companies buy things at auction all the time for resale by their companies?

What about the situation in the standard kinds of games of "game theory", where players can learn to cooperate through their moves---without explicit collusion. To take a concrete example, suppose two bidders on eBay, A and B, say, learn, only through bidding, that B will bid low on odd calendar days, and A will bid low on even calendar days. I emphasize that this is not by explicit arrangement, but by trial and error in bidding strategies. The players are, in one sense, colluding to reduce competition. Is this legal? Ethical? After all, in the world of game theory, this can be thought of as just the healthy and natural attainment of a Nash equilibrium.
August 17, 2007       A student piece of mine on the technological singularity, 1959

I was looking recently at the wikipedia page for technological singularity, and remembered the first thing I ever published, "The Simulation of Human Activities by Machine, Quadrangle, vol. 29, no. 3, College of Engineering, New York University, Jan. 1959, pp. 23-24. It was my version of an impending intelligence explosion. It's well packed with clichés and a bit pompous; my excuse is that I was still only 19 years old. A couple of predictions have been borne out: I boldly predicted that "Solid-state devices will probably replace inefficient vacuum tubes in a few years." And that "...our chess masters will eventually be outclassed by an IBM product; probably within ten or twenty years." Well, I got the corporation right, but rushed things a little.
June 14, 2007       Christopher Shea's Boston Globe column and blog

Thanks to Christopher Shea for his mention of my book in his nicely crafted Critical Faculties column "eBay-nomics" in the Boston Globe (June 10), and for his mention of my blog in the Boston Globe's "Brainiac" blog (June 13).

He continues his comments on the world of eBay strategy in his entry "eBay bidders v. eBay sellers", also in the Boston Globe's "Brianiac" blog (June 12). In this piece he describes recent results by Prof. Uri Simonsohn (Wharton School) on the problem faced by sellers in choosing auction closing times on eBay. More strategic moves in response to strategic moves. It's what makes game theory fascinating.

See also my comments on Simonsohn & Ariely's recent working paper "When Rational Sellers Face Non-Rational Buyers: Evidence from Herding on eBay" in the New Literature section of this blog.

June 10, 2007       eBay's new anti-sniping feature?

eBay recently introduced a feature (Bid Assistant) that appears to function in perfect harmony with my prediction in the June 8 entry below. It allows bidders to schedule bids on several items, and these bids are executed sequentially as items close, until one item is won. Here's how eBay describes the operation of the feature:
"Once you've placed your bids, Bid Assistant will move through your group (starting with the item that ends first), and place bids on your behalf."
with the caveat
"You cannot schedule bids to be placed at a specific time."
So it appears that the feature will actually place bids at the earliest opportunity, encouraging early bidding—just the oppposite of sniping. I'll verify this interpretation and report what actually happens when I get a chance to try it.

Note added June 10, 2007: Yes, this is indeed early-bidding heaven. I formed a group of two items, entered my bids, and invoked Bid Assistant. My bid on the first item was executed immediately. It was not high enough to become current high bidder, and I received a "you were outbid" notice.

June 8, 2007       Automated sniping: A prediction

Christopher Shea of the Boston Globe, asked me the following questions: "How do you think the sniping software is affecting auctions? Is it useful?" These are interesting and complex questions.

First, there is a distinction between sniping software that people buy (or write themselves), and sniping services like eSnipe. The latter requires that you trust the service as a fourth party (the third being eBay), not only to execute your bid, but to keep your password secret. The added security risk may be a minor worry to most users, but may well deter others. I point out in Snipers (p. 97) that at least one sniping service (Cniper) has captured data from user bids, albeit anonymized and used only for academic purposes.

As for the question of whether automated sniping is useful, if you agree with me that sniping is a good, if not optimal, strategy in most eBay auctions, then its automation is very useful. The main argument against it is that earlier bidding might scare off other bidders—but I believe the weight of the evidence points in the other direction. Early bidding attracts more bids and higher ultimate prices. In fact, I argue in Snipers that eBay owes much of its success to the second-price format that encourages early bidding.

The other main argument against sniping, that it presents the danger of your bid missing the deadline because of last-minute network traffic, is not, in my opinion, serious. For one thing, you can adjust the time margin for your snipe. (I believe eSnipe uses a rather tight default of 6 seconds.) The point is simply to get your bid in late enough so no one can respond to it, and in practice, automated sniping gets the job done.

How is automated sniping affecting eBay? It's difficult, if not impossible, to determine. As far as I know, automatic and manual last-second bids are indistinguishable to the ordinary outside observer.

I have seen stern warnings from sellers about the evils of sniping, automatic or manual. Mainly, they stress the danger of your last-second bid arriving at eBay too late. Such warnings are a sign to me that the sellers recognize the importance of stimulating early bidding. The fact that early bidding also works to the advantage of eBay—for the same reasons—prompts me to make a prediction: Despite the fact that eBay is constantly introducing what seems like an endless progression of new features and embellishments, automatic sniping will not be one of them.

June 7, 2007       Bidding above the Buy-It-Now-Price crazy like a fox

It may not be competely obvious that in some circumstances it is perfectly rational for an eBay bidder to bid above the posted Buy-It-Now price. I'll let you think about it. This is the subject of question 5.2 in snipers.

It may happen, then, that sometimes the purchase price will end up above that Buy-It-Now-Price, but that is no reason to conclude that people have acted crazily.

June 4, 2007       eBay's transparency gets a little cloudy

A few days after the page proof for Snipers went to the printers eBay instituted some changes that reduced the transparency of their operation. The stated motivation, which is quite reasonable, is to make it more difficult for interlopers to reach buyers and capture their business, or, worse, defraud them.

For one thing, it is no longer possible to search by bidder in ongoing auctions—what I call "shadowing" in Snipers. Another important change by eBay was the removal of bidder IDs from the bidding history when the bidding reaches $200. The listings in these cases are anonymized as bidder 1, bidder 2, etc., just the way they are in my plots in chapter 3, for example. To compensate (partially) for this removal of information, a rather elaborate summary of the history of each anonymized bidder is provided.

These changes illustrate the growing tension between complete transparency and buyer vulnerability. The transparency is extremely important in engendering trust. After all, eBay is above all else a trusted third party, keeping buyers' identities and high bids secret. But safety is also crucial. So eBay, in a continuing process of fine-tuning, is converging to a mechanism that is translucent rather than transparent.