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.