Three Essays on Shilling, Herding and Scoring, in Posted-Price and Auction Markets

In this thesis, I focus on the purchasing environments of eBay’s online platform and Christie’s live auctions. In chapter 2, I investigate the presence of seller squeeze-shilling behaviour on eBay’s smart-phone auctions. First, I present theoretical proofs to show that opportunistic sellers have the robust incentive to place shill bids in their own auctions, under both a private-valuation and an affiliated-valuation paradigm. Then I empirically prove the existence of squeeze shilling on the eBay platform. My findings show that the eBay proxy bidding system and the user agreement of retraction provides an excellent environment for opportunistic sellers to conduct squeeze shilling and extract extra profits. In chapter 3, I examine consumer herding behaviour in eBay posted-price listings using data from the iPhone screen protector market. I find that the cumulative number of total historical sales shown on the listings page is the essential trigger of herding behaviour. I find that, for listings with the advantage of the ‘herding effect’, the sellers of these listings have the incentive to manipulate the purchasing environment by increasing the posted price to extract extra profits. In chapter 4, I investigate the determinants of bidder’s valuation in wine auctions at Christie’s. I estimate the bidder’s valuation distribution using an indirect inference approach. I find that the parameter, wine score, is the crucial structural parameter that characterizes the bidder’s valuation distribution. By using the structural estimator, I estimate the optimal reserve price for each auction and simulate winning bids and find that the reserve price set by Christie’s is not optimal.