Research on Seller´s Shill Bid Strategy When Buyers Have Independent Private Evaluation

As the rapid development of e-commerce, online auction has taken more and more proportion in the business. In online auction, bidders bid for a good on the Internet, which makes it difficult to find and bound the bidders´ action, so cheating, say shilling by the seller, has become a popularity in online auction. Because it is so easy for a seller to bid in an online auction, then how to resist shill in online auction has become a problem worth studying. This paper solves this problem by studying the seller´s shill bidding strategies in English auction, first-price sealed auction and second-price sealed auction, and it focuses attention on environment where bidders´ evaluation of the good is independent private information. The result shows that if the online auction is an auction of second-price sealed auction, the seller´s shill bid is equivalent to the seller´s reserve price. Thus if the online auction is a second-price sealed auction, then it is not profitable for the seller to bid a shill price, so the seller will not engage in shill bidding. Because second-price sealed auction is not an auction which can easily be understood by the bidder, the paper gives some propositions on how to hold a second-price sealed auction on the Internet.