Economics of Auctions Online auctions are big business in society today. For example, take the stock price of two of the premier online auctions, Ebay and Ubid as exhibited in Table 1. Shown through the momentous percent of change in stock value in merely one year is the fact that online auctions are a business and the business is booming. Online auctions are capitalizing on the inadequacies of traditional auctions and giving a boost to the world of e-commerce. Person to person sites operate differently by bringing buyers and sellers together in a common forum and have no role in the actual exchange of goods or money.
Sellers post their items and set in some cases set a minimum price.
The posted items are described, often including a picture and the bidder then decides upon the value of the item and integrity of the seller. When the auction is complete, the buyer and seller both have the responsibility to close the deal with an exchange of money for the item. It is through this exchange that most problems associated with online auctions arise. As with everything else in an imperfect world, problems arise in online auctions. Although house auctions do have some minor difficulties, the true problems appear most frequently in person to person auctions.