Auctions on the Internet: What's Being Auctioned, and How?

This paper is an economist's guide to the recent phenomenon of auctions taking place on the Internet. I present a brief history of the development of Internet auctions as a type of electronic commerce, and give the results of an extensive survey of 142 different auction sites operating during autumn 1998. I estimate the size distribution of the sites, and find that revenues at the largest sites have been growing at more than 10% per month in 1998-99. Other issues addressed here include the business models the auction sites use, what goods they offer for sale, and what kinds of auction mechanisms they use. These new Internet auction institutions pose questions for economic theory, and give opportunities where auction theory might be used to improve Internet auctions in practice. I also present detailed data on the 1999 competition between the large incumbent eBay and the recent well-funded entrants Yahoo! and Amazon, and demonstrate that the different types of fees charged by auctioneers have measurable incentive effects on sellers' choices and transaction outcomes.


This version: 14 August 1999

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