Online Auctions that Reveal Bids Good for Buyers

. September 7, 2007

Online buyers are better served in markets where all bids are disclosed after the bidding, according to the Management Insights feature in the July issue of Management Science, the flagship journal of the Institute for Operations Research and the Management Sciences (INFORMS).

Management Insights, a regular feature of the journal, is a digest of important research in business, management, operations research, and management science. It appears in every issue of the monthly journal.

“Effects of Information-Revelation Policies Under Market-Structure Uncertainty” is by Ashish Arora and Ramayya Krishnan, Carnegie Mellon University; Amy Greenwald, Brown University; and Karthik Kannan, Purdue University.

Electronic B2B marketplaces like www.ariba.com are growing in importance. In third-party electronic marketplaces, sellers face uncertainty about the number of competitors they face in each market session. Since typically the same set of sellers repeatedly compete across market sessions, sellers can alter their bids to learn about their competitors, depending on how the electronic market place is organized, and specifically, how bid information is disclosed.

The authors compare two commonly used setups—one where all bids are disclosed after the bidding round is over, and one where only the winning bid is disclosed. They show that on average the price paid by buyers is higher when only the winning bid is disclosed.

As a result, buyers are better off in markets where all bids are disclosed at the conclusion of the bidding round.

The current issue of Management Insights is available at http://mansci.journal.informs.org/cgi/reprint/53/8/v. The full papers associated with the Insights are available to Management Science subscribers. Individual papers can be purchased at http://institutions.informs.org. Additional issues of Management Insights can be accessed at http://mansci.pubs.informs.org/.
The Insights in the current issue are:
· Industry Level Supplier-Driven IT Spillovers by Zhuo (June) Cheng and Barrie R. Nault
· The Impact of Prior Decisions on Subsequent Valuations in a Costly Contemplation Model by Elie Ofek, Muhamet Yildiz, and Ernan Haruvy
· The Price of Anarchy in Supply Chains: Quantifying the Efficiency of Price-Only Contracts by Georgia Perakis and Guillaume Roels
· Risk Mitigation in Newsvendor Networks: Resource Diversification, Flexibility, Sharing, and Hedging by Jan A. Van Mieghem
· Existence of Coordinating Transshipment Prices in a Two-Location Inventory Model by Xinxin Hu, Izak Duenyas, and Roman Kapuscinski
· Fairness and Channel Coordination by Tony Haitao Cui, Jagmohan S. Raju, and Z. John Zhang
· Learning from Experience in Software Development: A Multilevel Analysis by Wai Fong Boh, Sandra A. Slaughter, and J. Alberto Espinosa
· Does Transaction Misalignment Matter for Firm Survival at All Stages of the Industry Life Cycle? by Nicholas Argyres and Lyda Bigelow
· A Market-Based Optimization Algorithm for Distributed Systems by Zhiling Guo, Gary J. Koehler, and Andrew B. Whinston

INFORMS journals are strongly cited in Journal Citation Reports, an industry source. In the JCR subject category “operations research and management science,” Management Science ranked in the top 10 along with two other INFORMS journals.

The special MBA issue published by Business Week includes Management Science and two other INFORMS journals in its list of 20 top academic journals that are used to evaluate business school programs. Financial Times includes Management Science and four other INFORMS journals in its list of academic journals used to evaluate MBA programs.

About INFORMS
The Institute for Operations Research and the Management Sciences (INFORMS) is an international scientific society with 10,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, financial engineering, and telecommunications. The INFORMS website is www.informs.org. More information about operations research is at www.scienceofbetter.org.

Category: Auction News

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