Sunday, July 15, 2007

Applied game theory useful in online marketplaces

In today's society companies are getting ahead by using a Game Theory. This game theory helps companies to see what strategy another company is using so they can play against it.
A company called DUBAI is an international organization that is expert in the application of game theory to e-market design and e-commerce.
Ebay is one of the largest participants in this theory. Bidders will wait until the last minute of an auction in order to place their bid. This is because they know they have a better chance in getting what they are bidding on, due to the fact that no one will be able to place another bid. However the bidder doing this has to think in the eyes of other bidders in order to out bid them at the last minute.
Now a days there are companies that will watch an item for someone so that they don't have to constantly stare at a computer screen. The companies to the last minute bidding for the client in order to assure their client gets the item they want. This kind of theory is known as Sniping.
If companies are going to start using this sniping method in order to get ahead in their business, they will undoubtedly get ahead, but the question is for how long. There is only a certain amount that a company can do without using another approach.

2 comments:

John Stack said...

I am sure that the market for sniping will also meet some equilibrium. Once the market has enough sniping, it will just cancel itself out. It does seem to make the market competitive. The only way it could not make profit is if their costs patrolling these items exceeds its total benefits. This service will be too expensive.

Greg Delemeester said...

[This comment is by Chunzi.]

Comparing with the demand , it seems like the supply is much more than people’s needs as not all people buy things at auction websites and not all people who’d like to pay extra money for letting bidding company to bid the goods for them. Of course there are lots of people buy things on auction websites and some people who’d like to spend their money on bidding company and such companies will get costumers in short run. As people’s choice of online purchase is changing, bidding will not be the best way of purchasing goods.