IMS 6485: Auctions, Portals, & Communities 1 Dr. Lawrence West, MIS Dept., University of Central Florida [email protected] Topics Common themes Dynamic

IMS 6485: Auctions, Portals, & Communities

1Dr. Lawrence West, MIS Dept., University of Central [email protected]

Topics

• Common themes

• Dynamic pricing models and auctions

• Internet auction popularity

• Types of auctions & auction considerations

• The eBay case

• Portals

• Communities

• Common themes revisited



Auctions, Portals, & Communities on the Value Chain?

TRANS-PORTATIONCOMPANY

BROKER

INFORMATION FLOWS(SELLERS TO BUYERS)

FLOW OF GOODS

ADVERTISING .

INVOICE .

ORDER INFORMATION .

INFORMATION FLOWS(BUYERS TO SELLERS)

REQUEST INFORMATION .

PLACE ORDER .

MAKE PAYMENTS .

Animal

Vegetable

Mineral

INVENTORY

INVENTORY

INVENTORY

FACTORYWHOLE-SALER

INTERMEDIATE

GOODS

WHOLE-SALER

RETAILER

Where do these topics fall?



What Do These Topics Have in Common?

• Why do you think that these three topics are included in one chapter?

– Auctions

– Portals

– Communities

• "They are each based on feelings of shared interest and self-identification—in short, a sense of community."

• Could the same thing be said about shoppers at Wal Mart on Saturday morning?



Auctions

• The book (correctly) identifies auctions as "dynamic pricing models".

• What are other examples of dynamic pricing models?

– Volume discounts

– Members-only pricing

– Price discrimination

– Others?

• How are the prices "dynamic" in each instance?

• What determines how the final price is set?

• How are airline seat prices set?



Auctions (cont.)

• What has been the historical (pre-Internet) role of auctions?

• When do we see them used?

• When are they typically not used?

• Why would a seller expose themselves to the risk of an unexpectedly low price at an auction?

• What conditions must be true for an auction to be a viable selling and buying strategy



Dynamic Pricing

• Many forms of dynamic pricing, including auctions, are used when the seller does not know how much the buyer may value the item

• In other cases, the seller may know things about the buyer that causes them to think they can charge more, or must charge less, to get the buyer's business

– What is price discrimination

– Name examples of price discrimination

• Legal

• Illegal



Dynamic Pricing (cont.)

• Any market where haggling or negotiation takes place represents a dynamic pricing scenario

• Marked prices for products were sticky when it was difficult to change the physical price

• What has been the history of technologies that enabled dynamic pricing of goods (pre-Internet)?




• What are the fundamental advantages to the seller of dynamic pricing?

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• Consumers usually resent dynamic pricing

– May account for prevalence of fixed pricing strategies in many US markets that would be dynamic elsewhere

– Trend toward fixed price auto sales, a traditionally dynamically priced market segment



Auctions

• Why have Internet-enabled auctions become so popular?

– Liquidity (matching sellers with buyers)

– Price discovery

– Price transparency

– Market Efficiency—the market clears

– Lower transaction costs

– Consumer aggregation/Network Effects

• Consumers do not resent (or at least don't blame the seller) over the inherent dynamic pricing in auctions



How Do Auctions Affect Us?

• Do we want to use auction sources for procurement (upstream in the value chain)?

• Do we want to use auctions to sell products or services?

– Routine method of sale?

– Special case method?

• Do we want to host auctions for some other purpose:

– Revenue?

– Community building?

– Brand enhancement?

– Etc?



Different Types of Auctions—Advantages of Each

• Sealed bid—best bid wins• Vickrey auction—highest bid

wins but pays price of 2d highest bid

• English auction—traditional • Dutch auction—falling price

auction• Dutch Internet—ascending

price, multiple unit, lowest 'clearing' price is paid by all winners

• Japanese auction—like English but buyers must bid at each level

• Yankee auction—multiple unit. Price and quantity bid determine winnner

• Reverse auction—like English but sellers bid down prices

• Group buying—Like Yankee auction but sellers are bidding low prices with quantities

• Name your own price• Double auction—stock

markets



Auction Considerations

• Type of Product—Prices difficult to discover, perishable, commodity

• Product Life Cycle—late

• Channel Issues—Don't compete with existing channel

• Type of Auction to choose

• Initial Price Setting—Set low to rope in buyers

• Bid Increments—Low increments to maintain momentum

• Length of Auction

• Number of Items to Offer—Keep lot sizes lower if possible

• Price Allocation Rules—Differ by whether public or private

• Closed (private) vs. Public Bidding Rules



Consumer Behavior at Auctions

• See interesting discussion of

– Psychology of auctions

– Fraud and abuse

– Trust

• What personal experience and opinions do you have with each of these issues?



eBay

• Wow!!! Don't you wish you had…?

• What made eBay work?

– Auctions an important early driver of eBay's success

– What application of business case issues do we see in eBay?

– What eCommerce issues apply to eBay?

• "eBay now bills itself as a trading platform"

– What is the nature of eBay's expansion?

– What were the key enablers?

• Is eBay a merchant or a service provider?



Portals

• What is a portal?

• What are their revenue models

– Past?

– Present?

• Why are they so valuable?

– What single aspect of a portal has the most effect on value?

– How has this aspect affected the development efforts for portals?



Lessons from the Yahoo Case

• What are they?

• How important is content in Yahoo's portal?

– What has Yahoo been doing to manage content cost?

– Why can this be successful?

• Scalability



Communities

• How do virtual communities compare with physical communities?

• Can you form a relationship with someone you've never met?

– "Some argue that virtual communities are an adequate, even superior, replacement for traditional communities…"

– What do you think?



Communities and Business Models

• How do communities generate revenue (and how much)?

– For profit?

– Just enough to support the community?

• Read the discussion of moral boundaries between commerce and community?

– Is this a moral issue or one of consumer preference?



Types of Communities

• What are the revenue models or motivations for the managers of each of these types of communities?

– General communities

– Practice communities

– Interest communities

– Affinity communities

• Self and group identification

– Sponsored communities



Portals & Communities

• How are portals and communities similar and different?

• Which characteristic of each adds value to the other?

• Can characteristics of either add value to auction sites?

Documents

IMS 6485: Auctions, Portals, & Communities 1 Dr. Lawrence West, MIS Dept., University of Central Florida [email protected] Topics Common themes Dynamic