An auction is a market mechanism by which buyers make bids and sellers place offers. Auctions, an established method of commerce for generations, deal with products and services for which conventional marketing channels are ineffective or inefficient.
The Internet provides an infrastructure for executing auctions at lower cost with many more sellers and buyers. Auctions conducted online, have been in existence for several years on local area networks and were started on the Internet in 1995. Host sites on the Internet serve as brokers, offering services that enable sellers to post their goods for sale and allow buyers to bid on those items. Although the majority of consumer goods are not suitable for auctions and are best sold through conventional sales techniques (i.e., posted-price retailing), the flexibility offered by online auction trading may offer innovative market processes.
Auction items are in many cases unique, used, or antique. E-auctions have several limitations Because buyers cannot see the item, they may get a defective product. Buyers can also commit fraud. Thus, the fraud rate in e-auctions is very high. For instend, some of the C2C auctions conducted on the Internet are not secure, and some possible participants are scared away by the lack of security. On the other hand, some B2B auctions are conducted on highly secure private lines. There are several types of auctions, each with its own motives and procedures. It is customary to classify dynamic pricing into four major categories depending on how many buyers and sellers are involved
PROTECTING AGAINST E-AUCTION FRAUD
The largest Internet auctioneer, eBay, has introduced several measures in an effort to reduce fraud. Some are free, some are not. The following are some of eBay’s antifraud measures:
User identity verification
E-Bay uses the services of Equifax to verify user identities for a $5 fee. Verified eBay User, a voluntary program, encourages users to supply eBay with information for online verification. By offering their Social Security number, driver’s license number, and date of birth, users can qualify for the highest level of verification on eBay.
Authentication service
Product authentication is a way of determining whether an item is genuine and described appropriately. Authentication is very difficult to perform because it relies on the expertise of the authenticators because of their training and experience, experts can often detect counterfeits based on subtle details. However, two expert authenticators may have different opinions about the authenticity of the same item.
Grading services
Grading is a way of determining the physical condition of an item, such as “poor quality” or “mint condition.” The actual grading system depends on the type of item being graded. Different items have different grading systems—for example, trading cards are graded from A1 to F1, whereas coins are graded from poor to perfect uncirculated.
Feedback Forum
The eBay Feedback Forum allows registered buyers and sellers to build up their online trading reputations. It provides users with the ability to comment on their experiences with other individuals.
Insurance policy
E-Bay offers insurance underwritten by Lloyd’s of London. Users are covered up to $200, with a $25 deductible. The program is provided at no cost to eBay users.
Escrow services
For items valued at more than $200 or when either a buyer or seller feels the need for additional security, eBay recommends escrow services (for a fee). With an easy-to-access link to a third-party escrow service, both partners in a deal are protected. The buyer mails the payment to the escrow service, which verifies the payment and alerts the seller when everything checks out. At that point, the seller ships the goods to the buyer. After an agreed-upon inspection period, the buyer notifies the service, which then sends a check to the seller. (An example of a provider of online escrow services is tradenable.com.)
Nonpayment punishment
E-Bay implemented a policy against those who do not honor their winning bids. Protection toward seller’s base on a first-time nonpayment results in a friendly warning. A sterner warning is issued for a second-time offense, a 30-day suspension for a third offense, and indefinite suspension for a fourth offense.
Appraisal services
Appraisers use a variety of methods to appraise items, including expert assessment of authenticity and condition and reviewing what comparable items have sold for in the marketplace in recent months. An appraised value is usually accurate at the time of appraisal but may change over time as an item becomes more or less popular in the marketplace.
Verification
One way of confirming the identity and evaluating the condition of an item is through verification. Neutral third parties also will evaluate and identify an item through a variety of means with verification. For example, some collectors have their item “DNA tagged” for identification purposes. This provides a way of tracking an item if it changes ownership in the future.
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