The following paper was originally published in the
`Proceedings of the 3rd USENIX Workshop on Electronic Commerce
`Boston, Massachusetts, August 31–September 3, 1998
`
`Internet Auctions
`
`Manoj Kumar and Stuart I. Feldman
`IBM T.J. Watson Research Center
`
`For more information about USENIX Association contact:
`1. Phone:
`1 510 528-8649
`2. FAX:
`1 510 548-5738
`3. Email:
`office@usenix.org
`4. WWW URL:http://www.usenix.org/
`
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`Internet Auctions
`
`Manoj Kumar (mkumar@watson.im.com)
`Stuart I. Feldman (sif@watson.ibm.com)
`IBM Research Division
`T.J. Watson Research Center
`Yorktown Heights, NY 10598
`
`$EVWUDFW
`
`We describe an application for auctioning
`goods on the Internet. A variety of commonly used
`auction mechanisms
`that are supported by
`the
`application, security requirements, and pre-auction and
`post-auction interactions needed to complete auction
`based trading are discussed. Then we present a
`software architecture and describe
`the various
`processes
`that comprise
`the auction application.
`Finally, we discuss how the delay, security, and easy
`collaboration aspects of the Internet will cause auctions
`on the Internet to be different than the traditional
`auctions.
`
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`
`Most business activity on the Internet is limited
`to publicizing the business opportunity and catalog
`based sales, but it will rapidly expand to include the
`negotiations conducted to settle the price of the goods or
`commodities being traded. These negotiations are
`currently conducted by human intermediaries through
`various forms of auctions, bidding systems for awarding
`contracts, and brokerages. The role of the intermediaries
`can now be performed by Internet trading applications at
`a fraction of the cost. Trading on the Internet allows a
`business to reach a larger number of potential customers
`and suppliers in a shorter time and a lower cost than
`possible by other modes of communication, and to settle
`business transactions with lower cost overhead in a
`shorter time. Hence the rapid emergence of Internet
`based trading applications. Lee discusses the factors
`behind the success of Internet auction of second hand
`automobiles in Japan [1] supporting our belief.
`
`Auctioned or brokered sales are the norm in the
`business world for negotiating trades of large value. But
`
`consumer sales and small scale purchases typically stay
`with fixed prices, perhaps because of the high overhead
`cost of using the auction or brokerage method. The new
`economics of the Internet will make auctions popular in
`consumer and small business transactions also. Lee and
`Clark present economic forces underlying this transition
`[2]. Several success stories about Internet auctions are
`cited by Turban [3].
`
`in
`types of auctions are practiced
`Many
`different real world situations to achieve different
`business objectives such as best price, guaranteed sale,
`minimum collusion possibility, etc. Ralph Cassady
`presents an extensive survey of auction practices around
`the world [4]. Game theoretic treatments of the different
`kinds of auctions can be found in [5,6,7], while some
`experimental results are reported in [8]. In this paper we
`describe the design of an Internet auction system that can
`support most of the auction types and other business
`negotiation models.
`
`In this paper we first briefly review the
`requirements of an Internet auction application. Some of
`the important requirements are support for a wide variety
`of commonly practiced auctions and ease of integrating
`auctions with business’s existing back end applications
`to create a completely automated trading process.
`Security mechanisms, based on cryptographic methods
`and audit trails, are needed to prevent hackers from
`sabotaging auctions and buyers and sellers from cheating
`or disrupting
`the auctions.
` Efficient notification
`mechanisms to inform bidders of the latest bids are
`required to scale the auction application to large number
`of bidders.
`
`We have implemented an auction system that is
`operational now. It supports the breadth of auction
`styles, interaction requirements, and other attributes. We
`present the design for this auction application which
`implements these auction types and allows the seller to
`choose any of them and further fine-tune the rules to
`maximize his business objective. We describe key
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`the underlying object, process, and
`features of
`interaction models. In a companion paper we discuss
`various types of auctions in detail [9]. There we also
`discuss how auctions relate to other types of commonly
`used trading models such as brokerages, two party
`negotiations, and competitive bid-based procurement.
`
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`
`An auction application must support the various
`types of auctions practiced routinely around the world.
`In this section we first briefly review the different kinds
`of auctions. Given the unique characteristics of Internet,
`it is highly likely that other forms of auctions will also
`emerge. Next we discuss the steps of a complete auction
`based trading process., and then we discuss some
`requirements for security and access control. In addition
`to these requirements, the auction application should
`integrate with the back end ERP (enterprise resource
`planning)
`applications
`of
`an
`organization
`(or
`spreadsheets for small business and home businesses) in
`a straightforward manner. ERP applications are the
`transactional programs
`that automate a business’s
`various activities such as procurement, sales, invoicing,
`payments, human resources, etc.
`
`Different auction methods:
`
`The commonly used auction types are the
`open-cry auctions, single and multiple round sealed bid
`auctions and Dutch auctions. In an open-cry auction,
`also called an ‘English auction’, the buyers gather at a
`common
`location, physical or virtual,
`at
`the
`pre-specified time. Each buyer can hear the bid
`submitted by a rival buyer and has a limited time to
`respond to it with a higher counter-bid. In physical
`auctions the responses must be received within seconds,
`while in Cyber auctions it is conceivable that several
`minutes or hours will be allowed for the response.
`
`In a sealed bid auction the buyers are required
`to submit their bids by a specified deadline. The
`auctioneer keeps the bid information secret until the
`deadline, at which time the bids are evaluated and the
`winners are declared. Single round sealed bid auctions
`lack the competitive atmosphere (bidding frenzy) in
`open cry auctions which encourages the bidders to
`outbid their rivals. Multiple round sealed bid auctions
`rectify this situation. In a multiround sealed bid auction
`there is a deadline for each round of bids, and at that
`deadline either the auction is closed or the bids from the
`
`current round are publicized and a fresh round of bids is
`solicited by some new deadline.
`
`Dutch auctions are better suited for perishable
`items such as vegetables or airplane seats. Here the
`auctioneer starts with a very high asking price. Then he
`gradually decreases his asking price until buyers emerge
`with bids specifying how many items they will purchase
`at the current asking price. He can continue lowering his
`bid to maintain a stream of buyers while the inventory
`lasts. Furthermore, he can control how fast he depletes
`his inventory by controlling the rate at which he lowers
`the bid.
`
`Each of these auction methods has subtle
`variations such as:
`
`y Anonymity, i.e., what information is revealed during
`the auction and after the auction closes. For
`example, the identity of the bidders could be
`concealed. In a sealed bid auction the final winning
`prices could be kept confidential. In all auctions the
`amount of inventory may or may not be announced
`in advance.
`
`y Rules for ending Dutch and open cry auctions.
`Open cry auctions may end at a posted closing time.
`Alternatively the auctions could be kept open so
`long as new bids continue to arrive within some
`time interval of the preceding bid. This interval
`would be several minutes in an Internet auction and
`a few seconds for an auction being conducted in a
`meeting room. One could also choose to close the
`auction if either of the above two conditions is met
`or only when both conditions are met. Dutch
`auctions could close at a pre-specified time, when
`all the inventory has been sold, when the price has
`fallen
`to a pre-specified
`level, or at some
`combination of these three conditions.
`
`y Once the bidding phase is over, the bidders with the
`highest bids get the item being auctioned, but the
`price they pay could be the same as what they bid or
`lower. In a Discriminative Auction, also known as
`Yankee Auction, the winners pay what they bid. In a
`non discriminative auction people with winning bids
`pay the price paid by the winning bidder with lowest
`bid. Finally, in an auction for a single item, in a
`Vickrey Auction [10] the winner pays the price bid
`by the second highest bidder. Vickrey auctions are
`also referred to as second price sealed bid auctions.
`
`y Restrictions on bid amount: In all auctions the
`seller can specify the minimum starting bid. To
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`the bidding process minimum bid
`speed up
`increments are often enforced. The bid increment is
`roughly proportional to the current bid, i.e., they are
`smaller for lower bids and larger at higher bids.
`The seller may also be allowed to specify a reserve
`price, which is a lower limit on price acceptable to
`seller. The buyers may know that a reserve price
`exists but they may not know what the reserve price
`is.
`
`Though counterintuitive, Vickrey, Dutch, open
`cry and sealed bid auctions yield the same revenue for
`the seller when one item is being sold, the bidders are
`risk neutral, their valuations are independent draws from
`the same probability distribution, and each bidder knows
`only his valuation and the distribution function from
`which the other bidders draw their valuation. The result
`is known in literature as the Revenue-Equivalence
`Theorem, and the assumptions about the valuation are
`known as the independent private value model. Another
`interesting property of Vickrey auctions is that they are
`incentive compatible, i.e., it is in the best interest of the
`bidder to bid their true valuations.
`
`However, experimental observations of the
`outcomes of various types of auctions differ from the
`strategic behavior predicted by the game theory based
`analysis because of psychological factors such as
`preference reversal and misjudged revision of valuation
`and winning probability during an auction [11]. Though
`the Dutch and first-price sealed bid auctions are
`strategically equivalent, Dutch auctions fetch a lower
`price. The Dutch auction price is lower than that
`predicted by
`the strategic behavior
`in
`traditional
`analysis. The two plausible explanations presented in
`[11] are that: 1) bidders derive a positive utility from
`suspense (they play against the odds to remain at the
`gambling table); 2) They update (lower) their estimate of
`other bidder’s valuations as the offering price moves
`down. Similarly, though the Vickrey and English
`auctions are strategically equivalent, Vickrey auctions
`fetch a price higher than the English auction. The
`Vickrey auction bidders bid above their true valuations.
`The plausible explanation presented in [11] is that the
`bidder’s mistakenly believe that by bidding marginally
`above the true valuation they increase their chances of
`winning without risking negative payoff.
`
`In this paper we focus on auctions of single or
`multiple copies of indivisible goods where the goods
`being sold come from a single seller, or are aggregated
`before the auction process begins and are sold with the
`same set of rules such as reservation or asking price.
`Beam et.al. address the problem of scheduling auctions
`for periodically arriving goods where arrival of bids
`
`from buyers follows a Poisson process [12]. Many
`market mechanisms exist to match multiple sellers
`directly with multiple buyers. Various types of stock
`exchanges, secondary markets for financial instruments,
`and commodity exchanges fall in this category. Detailed
`discussion of these is beyond the scope of this paper.
`Some interesting examples are the reverse unilateral
`auctions offered by CXN (www.cxn.com) and also
`discussed by Beam and Fusz in [13], Generalized
`Vickrey Auctions [14], and continuous double auctions
`[15]. In the CXN auctions all sellers specify their asking
`price and the auctioneer communicates the lowest asking
`price to the potential buyers. In a Walrasian auction
`each bidder specifies a bid schedule consisting of
`multiple price points and the quantity demanded at each
`price [16]. The trading mechanisms of New York and
`NASDAQ stock exchanges are described in [17].
`
`Complete auction process:
`
`A complete auction-based
`comprises six basic activities:
`
`trading process
`
`1.
`
`Initial buyer and seller registration: This step
`deals with the issues relating to authentication of
`trading parties, exchange of cryptography keys, and
`perhaps creation of a profile for each trader that
`reflects his interest in products of different kinds
`and possibly his authorized spending limits.
`
`2. Setting up a particular auction event: This step
`deals with describing the item being sold or
`acquired and setting up the rules of the auction. The
`auction rules explain the type of auction being
`conducted (open cry, sealed bid, Dutch), parameters
`negotiated (price, delivery dates, terms of payment,
`etc.), starting date and time of the auction, auction
`closing rules, etc.
`
`3. Scheduling and advertising: To attract potential
`buyers, items of the same category (art, jewelry, rare
`coins) should be auctioned together at a regular
`schedule. Popular auctions can be mixed with less
`popular ones to force people to be present in the less
`popular auctions.
` Items
`to be auctioned
`in
`upcoming auctions are advertised, and potential
`buyers are notified in this step.
`
`4. Bidding: The bidding step handles the collection of
`bids from the buyers and implements the bid control
`rules of the auction (minimum bid, bid increment,
`deposits required with bids) and for open cry
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`auctions notifies the participants when new high
`bids are submitted.
`
`5. Evaluation of bids and closing the auction: This
`step implements the auction closing rules and
`notifies the winners and losers of the auction.
`
`6. Trade settlement: This final step handles the
`payment to the seller, the transfer of goods to the
`buyer, and if the seller is not the auctioneer,
`payment of fees to the auctioneer and other agents
`(appraisers, consignment agents, etc.).
`
`Security Requirements:
`
`The auction house policy and the instructions
`from the seller dictate whether the auction is accessible
`to the public at large, to the buyers/sellers registered
`with the auction services, or only to buyers registered to
`participate in the current auction. Access control
`mechanisms are needed to enforce these rules. Security
`mechanisms are needed
`to ensure
`that
`the site
`announcing the auction and the auction rules is not
`sabotaged by an outsider. This includes preventing
`unauthorized postings and alterations as well as
`preventing denial of service attacks. A trusted third
`party service for enforcing access control rules and
`digital signing of contracts to ensure non-repudiation, is
`discussed in [18].
`
`Cryptographic mechanisms that prove that a
`particular auction notice was posted and accessible
`during a certain time period will be very useful in
`government auctions.
` During
`the bidding phase
`cryptographic mechanisms are needed to ensure that a
`bid submitted is not tampered with, or disclosed to other
`bidders in violation of the auction rules. In open cry
`auctions spurious bids,
`injected by
`the seller or
`auctioneer to prompt the highest bidder to further
`increase his bids, must be prevented by establishing a
`verifiable connection from every bid to a known bidder.
`In the real world such unethical behavior is called taking
`bids off the wall, or ceiling. A shill is a human agent
`deployed to inject spurious bids into an auction.
`
`Franklin and Reiter describe a secure protocol
`for eliminating fraudulent activity by the auctioneer [19]
`in a sealed bid auction. It employs multiple auction
`servers, at least some of which are trusted to stay honest.
`This certainly is useful to control employee fraud within
`a large auctioneer’s organization. However, for mass
`trading on the Internet where many small organizations
`are involved, placing trust in the organization itself is an
`issue. In simplistic terms, it is reasonable to expect that,
`
`say three out of five employees (servers or server
`administrators)
`in a government organization or
`xyz_megacorp will be honest. But it is difficult to
`assume that three out of five servers deployed by the
`relatively small xyz_little_corp will not collude.
`
`Spurious or phantom bids are possible in real
`auctions because knowledgeable or well known buyers
`often want to remain anonymous (when Leonardo
`DeVinci’s diary was won by Bill Gates; the buyer’s
`identity was discovered only after the auction was over).
`The presence of knowledgeable bidders in an auction
`prompts other bidders to bid high undermining the
`interest of the knowledgeable bidder. Accommodation
`of anonymous bidders gives the auctioneer an excuse to
`pick bids from ‘nowhere’. Internet auctions cannot
`overcome this mechanism design constraint.
` The
`problem is further aggravated because Internet auctions
`will have much larger participation from geographically
`dispersed bidders and cyber identities can be created
`easily. The possible solution approaches to this problem
`are caveat emptor, requiring mechanisms to let bidders
`establish the identity of other bidders, or an independent
`third party trust rating system which can investigate the
`ethical behavior of
`the auctioneer and assign a
`trustworthiness rating to it. Shills are detectable by
`experienced bidders because when shills are the winner
`in an auction, which happens some times accidentally,
`the items reappear on the auction block. Shills appear
`more frequently at auctions and tend to bid on unrelated
`items. However, it is easy to hide these clues on the
`Internet.
`
`(cid:22)(cid:17)(cid:3)’HVLJQ(cid:3)RI(cid:3)$XFWLRQ
`
`6RIWZDUH
`
`In this section we describe the design of an
`auction application. Figure 1 shows the object model
`and Figure 2 shows the data flow diagram of a generic
`auction application. It supports the various types of
`auctions discussed in the previous section.
`
`
`Object Model for auction application:
`
`In Figure 1 multiple products, traders, and
`auctions are part of the auction house. Each auction is
`for one or multiple copies of a single product and a
`subset of traders participate in it. The product object
`describes the product or service being auctioned. It is
`separate from the auction object because the same
`product can be auctioned in different quantities in
`different auctions held at different times. For example, a
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`seller with 500 widgets may wish to sell 100 widgets on
`each day of a chosen week. The search object supports
`various search methods on the products in the store. Its
`attributes will be the different classifications of products
`required by the search methods.
`
`In addition to products and participants, the
`auction object
`comprises messages
`created by
`participants, terms of the final sale, rules of the auction,
`and the final trade generated at the end of the auction.
`The important message types in an auction are query,
`create, update, and delete bid messages send by the
`buyers; and messages sent by the seller to close the
`auction manually or change the asking price in a Dutch
`auction.
`
`The state attribute of auction restricts the type
`of messages a participant can create when the auction is
`in that state. For example a simple open cry auction can
`be in one of three states, active, closed, or not-started.
`Changing rules and parameters of the auction, like
`adding or changing the reserve price or minimum
`starting bid, would be allowed only by the seller while
`the auction is in the not-started state. Similarly, buyers
`may be allowed to submit bids while the auction is in
`not-started or active state, but they may be allowed
`
`withdraw bids only when the auction is in not-started
`state. The accept-message method of auction object
`queries the auction rules external to the auction object to
`determine if a message can be accepted.
`
`Each message, for example, bid from a buyer or
`closing of auction by the seller, results in updates or
`notifications being sent to all or some of the other
`participants. Different participants may get different
`notifications. For example, when a bid is submitted in
`an open-cry auction the bid submitter gets a simple
`acknowledgment, the bidders whose bids are lower than
`the newly submitted bid will be informed that a higher
`bid has been submitted, while bidders whose bids are
`already higher than the newly submitted bid may get no
`notification at all. Similarly, when the auction closes,
`the winners and losers will get different notifications.
`The notification object encapsulates multiple transport
`methods to send the notifications to the participants.
`E-mail, online notification via a push or pull mechanism,
`and manual polling by the bidder are possible. The rules
`object provides
`the method
`to determine which
`notification methods must be used with each message.
`
`The rule object contains methods which modify
`the behavior of other objects. Two examples cited
`
`Product
`
`Create
`View
`
`Terms of
`Sale
`
`Trader
`
`Create message
`
`is a
`
`Search
`
`Buyer
`
`Seller
`
`Auction House
`
`Add trader
`Add auction
`Add product
`
`Auction
`State
`
`Start auction
`Close auction
`Accept message
`
`Rules
`
`Bid validate
`Bid evaluate
`Bid update.
`Notification
`method
`content
`
`Trade
`Deal specifics
`Winners/Losers
`
`Message
`
`sent by
`
`Message type
`
`Participant
`
`Notification
`
`Figure 1
`
`sent to
`
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`

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`earlier are rules governing when a certain type of
`message is accepted by the auction object and the rule
`governing the method used to notify participants. Rules
`which need to be set or fine-tuned by the auctioneer or
`seller are specified in the rule object and methods are
`provided to review and set these rules.
`
`the
`trader object basically contains
`The
`registration information for the buyers and sellers. In
`addition to name, address etc., it may contain buyer
`preferences for products, preferred method for being
`notified of auction updates, and passwords. It also
`contains a list of auctions on the auction site that a
`bidder has participated in or has expressed an explicit
`interest in. We refer to this short list as the bidder’s
`personal auction gallery.
`
`The auction object and the rules object would
`be subclassed to support different kinds of auctions. For
`example, the Dutch auction object derived from the
`basic auction object would provide a method to accept a
`message from the seller which revises the asking price
`downwards.
` Similarly
`the bid objects can be
`subclasssed. All bids would share common sending,
`receiving, and archiving methods, but the Dutch auction
`bids would not allow a non null value for price (the
`Dutch auction bid contains amount, the price being
`quoted by the auctioneer/seller).
`
`Process flow model:
`
`In the process flow diagram in Figure 2, the
`three rectangles (buyers, sellers, and settlement system)
`are the active producers or consumers of information at
`the boundary of the data flow graph. The disk symbols
`are information repositories internal to the data flow
`model.
` Ovals represent processes, solid arrows
`represent flow of information, and dashed arrows
`represent control signals. A hollow triangle at the end of
`a line indicates a repository created by a process, some
`of which can be temporary. The five steps of the
`auction process mentioned in the previous sections are
`identified in the data flow model at the bottom of Figure
`2.
`
`As shown in Figure 2, buyers and sellers can
`themselves
`to
`create
`trader
`objects.
`register
`Additionally, buyers register their preferences through
`the preference process and sellers can use
`this
`information to create target lists to promote to promote a
`product or class of product to buyers in a target list. The
`sellers use
`the define/update process
`to create a
`description of the product being auctioned and use the
`Setup auction process to describe the type of auction and
`
`various rules that go along with it. If the auction rules
`permit they can cancel the auction or update some of its
`parameters such as closing time. The alert process
`notifies a buyer when a product is placed on auction that
`matches his preference, or if the auction rules or product
`information changes for such products. The search
`process provides various search metaphors to help the
`buyer find/select an auction. The selected auction can
`either be entered in a list of interesting auctions or the
`buyer can proceed to bid on it. In the latter case
`notifications may be sent to bidders whose bids are
`superseded.
`
`The seller can also select an auction, and in
`case of Dutch auction use the offer process to change the
`asking price. This again results in notifications being
`sent to people who are participating in the Dutch auction
`(participation in a Dutch auction by buyers who have not
`bid at all can be recorded by keeping a zero quantity bid
`in the bid table). Finally the close (auction) process
`normally closes the auction automatically based on
`auction rules, but supports manual closing by the seller.
`When an auction is closed, all the bids submitted for that
`auction are evaluated and the winners and losers are
`notified (Dutch auctions, by definition have winners
`only). Shipping and payment instructions pertaining to
`each wining bid are sent to the back-end ERP system for
`final settlement.
`
`Each buyer can maintain a list of auctions that
`are of interest. This list is maintained at the auction
`server. The auctions in which a buyer participates are
`added automatically to the short list. The buyers select
`auctions from the list or through the search processes
`provided and submit bids for auctions in progress. In
`auctions of multiple items, buyers are allowed to submit
`multiple bids. Depending on the cutoff price for
`winning bids, and the cutoff time for bids sharing the
`cutoff price, all, some or none of them could be the
`winning bids. Currently we do not implement the ability
`to bid on a bundle of goods. We also do not support the
`ability to submit a set of bids for the same or different
`items where only one of the bids, the best one based on
`the evaluation criterion deployed, will be considered.
`The buyers can review the bids they have submitted and
`increase/modify the bids. In open cry and Dutch
`auctions the buyers can review the bids submitted by
`other bidders.
`
`is fundamentally
`The Auction application
`driven by the auction rules repository. It includes the
`schedule for the auctions, templates for creating the
`popular kinds of auctions, and the rules governing
`individual auctions. Different product in the product
`repository can be auctioned using different auction types
`
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`

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`Register
`
`Alert
`
`Search
`
`Pref.
`
`Buyer
`
`Display
`
`Short
`List
`
`Auction
`
`Select
`
`Bid
`New bid
`View/Del/
`update
`
`Regis-
`tration
`
`Pref. &
`Target
`
`Product
`
`Auction
`Rules
`
`Auction
`Starts
`
`Bids
`
`Settlement (Backend)
`
`Notify
`
`Notify
`
`Eval-
`uate
`
`manual
`eval.
`
`Target
`
`Define
`Update
`
`Cancel
`Update
`
`Offer
`
`Close
`
`Register
`
`Setup
`Auction
`
`Select
`
`Auction
`
`manual close
`
`Regstration
`
`Product description
`& auction setup
`
`Seller
`
`Figure 2
`
`Bidding
`
`Auction Close
`& Evaluating bids
`
`eBay Ex. 1006, Page 8 of 13
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`

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`and policies. As shown in Figure 2, the auctions rules
`define:
`
`Bidding process:
`1. What is the content of a bid, i.e., price and quantity
`for a regular auction or quantity only for a Dutch
`auction.
`2. Under what conditions can a previously submitted
`bid be withdrawn.
`3. The minimum bid, bid increments, and deposits
`required with bids.
`4. The information sent back to the buyers and sellers
`in response to bids received. For example, in an
`open cry auction the notification to the buyers in
`response to a bid would be some subset of highest
`bids, and a subset of information from each bid. For
`example, the bidder’s identity could be dropped. In
`a sealed bid auction only the bidder sending the bid
`will get a simple acknowledgment.
`In open cry and Dutch auctions, which subset of the
`bidding history is accessible to the bidders.
`6. How the notifications are sent back: e-mail, live
`sockets, etc.
`7. Which subset of buyers are eligible to submit bids.
`8. Are bidders allowed to submit multiple bids when
`multiple items are on sale.
`
`5.
`
`Seller’s options:
`1. The seller’s ability to modify the sell offer by
`lowering published price in a Dutch auction, or the
`inventory being auctioned.
`2. Auction closing rules, i.e., whether the auction ends
`by seller’s manual intervention, at a fixed time
`automatically, after a fixed period of bidder
`inactivity, or some combination of the three.
`3. Under what conditions, if any, can the seller change
`the auction rules or withdraw the auction.
`4. Rules for resolving tied bids, i.e., whether an earlier
`bid gets the priority or repeat customers are given
`higher priority.
`5. Complex bid evaluation rules like giving weight to
`bids specifying large product quantities or prompt
`payment.
`
`Navigation
`
`Figure 3 shows how the bidders navigate the
`auction web site. Each bubble shows a web page and
`arcs from one page to another indicate that a hot link is
`available from the first page to the second. The seven
`pages marked with asterisk can be accessed any time
`
`from the side bar. The auction site URL puts a bidder
`on the Welcome page from where a registered user can
`authenticate himself to the web site and initiate a secure
`session (login). An unregistered user will get the
`opportunity to fill in a registration form which may be
`processed online or off-line. After registering, the
`bidders can browse through or search the products in the
`auction house which will possibly result in a product
`being selected and its description presented to the
`bidder. If the product is on auction, the rules of auction
`can be viewed, and bids can be submitted for that
`product.
`
`From the home page the bidder can also see a
`list of all auctions at the auction site or a subset of these
`which are in his personal auction gallery. From either
`list, the bidder can select an auction and access the
`description of the product being auctioned, see the rules
`of the auction, or bid on the product. For open-cry
`auctions he can also see a subset of the previously
`submitted high bids for that product. In both these lists,
`the entry for an auction also includes the auction type,
`quantity being auctioned (if the rules permit), best bid or
`current asking price for open cry and Dutch auctions
`respectively, and auction closing time if determined.
`
`From the list of high bids for a product
`mentioned above, a buyer can increase his existing bid,
`submit a new bid, review the auction rules or access the
`product description. Similarly, from the home page a
`buyer can access the list of all his bids and perform the
`same functions. Finally from the home page a buyer
`can access his message box which contains all the
`notifications sent by the auctioneer to the buyer. When
`ever there is an unread message in the mailbox of the
`buyer, an icon flashes in the side bar on all web pages.
`This icon is in a small frame which refreshes itself every
`few seconds (Netscape client pull feature. Refresh time
`is specified in the HTML header).
`
`Notification:
`
`two notification mechanisms are
`Currently
`provided in the auction prototype. First one is the
`simple e-mail. The second one is through the message
`box mentioned in the previous paragraph. E-mail is
`necessary to communicate with buyers who are not
`looking at one of the auction site pages when a message
`need to be delivered. Message box is more convenient
`for those who are on some auction site page when the
`message is to be delivered.
`
`eBay Ex. 1006, Page 9 of 13
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`

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`Personal
`Auction
`Gallery
`
`Home
`
`**
`
`All
`auctions
`
`*
`
`Bids
`on a
`product
`
`*
`
`Messages
`
`Welcome
`Login
`
`New
`Registration
`
`*
`
`Search
`
`*
`
`Browse
`
`*
`
`All bids
`of an
`user
`
`Product
`Description
`
`Auction
`Rules
`
`Bid
`
`Pay
`
`Shipping
`Instructions
`
`Figure 3
`
`Other than the mailbox icon in the side bar
`mentioned in the previous page, only the bid submission
`page is updated dynamically to show the current highest
`bid or cu