• English auction: This is what most people think of as an auction. Participants bid openly against one another, with each bid being higher than the previous bid. The auction ends when no participant is willing to bid further, or when a pre-determined "buy-out" price is reached, at which point the highest bidder pays the price. The seller may set a 'reserve' price and if the auctioneer fails to raise a bid higher than this reserve the sale may not go ahead.

• Dutch auction: In the traditional Dutch auction the auctioneer begins with a high asking price which is lowered until some participant is willing to accept the auctioneer's price, or a predetermined minimum price is reached. That participant pays the last announced price. This type of auction is convenient when it is important to auction goods quickly, since a sale never requires more than one bid. The Dutch auction is named for its best known example, the Dutch tulip auctions; in the Netherlands this type of auction is actually known as a "Chinese auction". "Dutch auction" is also sometimes used to describe online auctions where several identical goods are sold simultaneously to an equal number of high bidders. Economists call the latter auction a multi-unit English ascending auction.

• Sealed first-price auction: Also known as Sealed High-Bid Auction or First-Price Sealed-Bid Auction (FPSB). In this type of auction all bidders simultaneously submit bids so that no bidder knows the bid of any other participant. The highest bidder pays the price they submitted.

• Sealed second-price auction, also known as a Vickrey auction: This is identical to the sealed first-price auction, except the winning bidder pays the second highest bid rather than their own. In theory, this is mathematically equivalent to the English auction, because in both the first-place bidder receives the item at a price equal to the second-place bidder's willingness to pay, plus the bid increment. True strategic equivalence requires a modified model of the English ascending auction in which the price rises continuously with bidders choosing when to drop out. When all but one bidder drops out, the good is allocated to the remaining bidder at the price at which the second-to-last bidder dropped out. Implemented as such, this is known as a Japanese Auction.

• Silent auction: This is a sealed variant often used in charity events, but involving the simultaneous sale of multiple items. Participants submit bids normally on paper, near the item. They may or may not know how many other people are bidding or what their bids are. The highest bidder pays the price they submitted.

• Procurement auction: This kind of auction reverses the roles of seller and buyer. The buyer puts out an RFQ for a given commodity and providers offer progressively lower prices in hopes of getting the business. At the end of the auction, the lowest bid wins.

• Digital art auction: In this indefinitely long auction, designed for unreleased works that are trivially reproducible at zero cost (recordings, software, drug formulae), bidders openly submit their maximum bids (which may be adjusted or withdrawn at any time). The seller may review the bids and close with a price of their choosing at any time—the successful bidders that pay this price are those whose bid meets or exceeds it, and these are the only bidders who receive a copy of the item.

• Open outcry auction: This type of auction is used in stock exchanges and commodity exchanges, where trading occurs on a trading floor and traders may enter verbal bids and offers simultaneously. Transactions may take place simultaneously at different places in the trading pit or ring. This type of auction is being replaced by electronic trading platforms.

• Unique bid auction: In this type of auction users post blind bids and are given a range of prices they can place a bid in, often a capped limit. The highest, or lowest, unique bid wins. For instance an auction is given a maximum bid of 10. If the top five bids are 10, 10, 9, 8, 8 then 9 would be the winner being the highest unique bid. This a popular online type of auction.

• Buy-out auction: This auction has a predetermined buy-out price in which the bidder can end the auction by accepting the buy-out price. The buy-out price is set by the seller. The bidder can choose to bid or use the buy-out option. If no bidder chooses to utilize the buy-out option, the auction ends with the highest bidder winning the auction.

• Combinatorial Auction: In some cases, a buyer's value for the goods that are up for auction is a complex interaction of the type and number of goods he receives (known as a "bundle"). For instance, if bicycle wheels and bicycle frames are sold separately in an auction, a bidder may value a bundle consisting of a single wheel or a single frame at $0, but may value the bundle of two wheels and one frame at $200. If forced to purchase each component of a bundle in a separate auction, the bidder faces a dilemma: bidding enough to win the components of the bundle that are sold first may result in a financial loss if he fails to win the components that are sold later, but failing to purchase the components that are sold first ensures that he will not win the bundle. This dilemma can be overcome by selling all goods simultaneously and allowing buyers to submit bids on combinations of goods. Such combinatorial bids may offer to pay a certain amount if all units of a buyer-specified bundle are awarded, but nothing otherwise. They may also offer to purchase one bundle of goods or another, but not both. Sorting out which buyers win which bundles (and sometimes the amount they must pay for them) is usually computationally complex. This complexity is overcome by feeding the bids into an optimization algorithm (such as a linear programming problem).

If more than one identical item is sold, there are two possible generalizations of the second-price auction. In a uniform-price auction, all of the winning bidders pay the price submitted by the highest non-winning bidder. Bidders will not typically bid their true value in a uniform-price auction with multiple units. In a Vickrey auction, the pricing rule is more complicated, but preserves the property that bidders will bid their true valuation. It is also possible to auction each identical item individually. Once each item has been priced, the winning bidder is entitled to buy the remaining goods at the same price. Items the winning bidder opts not to purchase are auctioned again. This system creates a tension between the desire to hold back on bidding since later items will almost certainly be cheaper, and the chance that by losing the first round of bidding all possibility of purchasing will be lost.

Bidders in the traditional Dutch auction and sealed first-price auction will tend to underbid what they believe the item is truly worth in hopes of getting the item for less, or in order to avoid the winner's curse. This behavior is known as bid shading. These two auctions are also theoretically equivalent, but in practice Dutch auctions will produce less revenue than sealed first-price auctions (one of the important results of Experimental economics).

Work in the theory of auctions contributed to Vickrey's 1996 Bank of Sweden Prize.

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Billpoint was the name of a credit card processing service purchased by online auctioneer eBay in 1998. Billpoint's website was taken offline while eBay integrated Billpoint into their auction service, and it did not debut again until Spring 2000 when it was relaunched as a joint-venture with Wells Fargo bank. In the meantime, online payment service PayPal debuted and became very popular with eBay's customers. eBay and Billpoint spent the majority of the next two years trying to overtake the upstart PayPal but with little success. In July 2002, eBay CEO Meg Whitman struck a deal with PayPal CEO Peter Thiel to acquire PayPal, and when the acquisition was finalized that October eBay began the process of phasing out Billpoint.

Links

• www.paypalwars.com

This guide is licensed under the GNU Free Documentation License. It uses material from the Wikipedia.

Founded in San Jose on September 4, 1995 by Pierre Omidyar and Jeff Skoll as Auctionweb, part of a larger personal site that included, among other things, Omidyar's own tongue-in-cheek tribute to the Ebola virus.

The first item sold was Omidyar's broken laser pointer for $14.83. Astonished, he contacted the winning bidder and asked, "did he not understand the laser pointer was broken?" Omidyar received the following email in reply: "I'm a collector of broken laser pointers." (The frequently repeated story that eBay was founded to help Omidyar's fiancee trade PEZ Candy dispensers was fabricated by a public relations manager in 1997 to interest the media. This was revealed in Adam Cohen's 2002 book and confirmed by eBay.)

It officially changed its name 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.

Items and services

Millions of collectibles, appliances, computers, furniture, equipment, vehicles, and other miscellaneous items are listed, bought, and sold daily. Some items are rare and valuable, while many others are dusty gizmos that would have been discarded if not for the thousands of eager bidders worldwide, proving that if one has a big enough market, one will find someone willing to buy anything. Anything can be sold as long as it is not illegal or on the eBay banned list. Services and intangibles can be sold too. It is fair to say that eBay has revolutionized the collectibles market by bringing together buyers and sellers internationally in a huge, never-ending yard sale and auction. Large international companies, such as IBM, sell their newest products and offer services on eBay using competitive auctions and fixed-priced storefronts. Regional searches of the database make shipping slightly more rapid or cheaper. Software developers can create applications that integrate with eBay through the eBay API by joining the eBay Developers Program. As of June 2005, there were over 15,000 members in the eBay Developers Program, comprising a broad range of companies creating software applications to support eBay buyers and sellers as well as eBay Affiliates.

In June 2004, eBay prohibited the sale and auction of both alcohol and tobacco products on the British site ebay.co.uk. Some exceptions to this rule are made for rare aged liquors, where a bottle may sell for many times higher than its actual value in alcohol.

There has also been controversy regarding items put up for bid that violate ethical standards. In late 1999 a man offered one of his kidneys for auction on eBay, attempting to profit from the potentially lucrative (and, in the United States, illegal) market for transplantable human organs. On other occasions, people and even entire towns have been listed, often as a joke. In general, the company removes auctions that violate its terms of service agreement within a short time after hearing of the auction from an outsider; the company's policy is to not pre-approve transactions. eBay is also an easy place for unscrupulous sellers to market counterfeit merchandise, which can be difficult for novice buyers to distinguish without careful study of the auction description.

eBay's Latin American partner is MercadoLibre.

eBay's main rivals are Amazon.com Marketplace and Yahoo.com Auction.

This guide is licensed under the GNU Free Documentation License. It uses material from the Wikipedia.