Modeling Price Dynamics in eBay Auctions Using Principal Differential Analysis

36 Pages Posted: 1 Jun 2007

See all articles by Wolfgang Jank

Wolfgang Jank

University of Maryland - Decision and Information Technologies Department

Galit Shmueli

Institute of Service Science, National Tsing Hua University, Taiwan

Shanshan Wang

University of Maryland - College of Computer, Mathematical and Natural Sciences

Paul Smith

University of Maryland - College of Computer, Mathematical and Natural Sciences

Date Written: December 8, 2006

Abstract

Empirical research of online auctions has dramatically grown in recent years. Studies using publicly available bid data from websites such as eBay.com have found many divergences of bidding behavior and auction outcomes compared to ordinary offline auctions and auction theory. Among the main differences between online and offline auctions is their longer duration (typically a few days). Along with the anonymity of bidders and sellers and the low barriers of entry, the longer online auctions tend to exhibit variable dynamics both in the bid arrivals and in the price process. In this paper we propose a family of differential equations models that captures the dynamics in online auctions. We show that a second-order differential equation well-approximates the three-phase dynamics that take place during an eBay auction. We then propose a novel multiple-comparisons test to compare dynamic models of auction sub-populations, where the population grouping is based on characteristics of the auction, the item, the seller, and the bidders. We accomplish the modeling task within the framework of principal differential analysis and functional data models.

Keywords: Auction dynamics, functional data analysis, differential equation, price curve, multiple comparisons

Suggested Citation

Jank, Wolfgang and Shmueli, Galit and Wang, Shanshan and Smith, Paul, Modeling Price Dynamics in eBay Auctions Using Principal Differential Analysis (December 8, 2006). Robert H. Smith School Research Paper No. RHS-06-052. Available at SSRN: https://ssrn.com/abstract=990009 or http://dx.doi.org/10.2139/ssrn.990009

Wolfgang Jank (Contact Author)

University of Maryland - Decision and Information Technologies Department ( email )

Robert H. Smith School of Business
4300 Van Munching Hall
College Park, MD 20742
United States
301-405-1118 (Phone)

HOME PAGE: http://www.smith.umd.edu/faculty/wjank/

Galit Shmueli

Institute of Service Science, National Tsing Hua University, Taiwan ( email )

Hsinchu, 30013
Taiwan

HOME PAGE: http://www.iss.nthu.edu.tw

Shanshan Wang

University of Maryland - College of Computer, Mathematical and Natural Sciences ( email )

2300 Symons Hall,
University of Maryland
College Park, MD 20742-3255
United States

Paul Smith

University of Maryland - College of Computer, Mathematical and Natural Sciences ( email )

2300 Symons Hall,
University of Maryland
College Park, MD 20742-3255
United States

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