Introduction
Electronic commerce has had a great impact on the global economy since its entry in the last decade, especially on the internet. The total retail revenue of e-commerce is represented by a growth rate larger than 25 percent (US Department of Commerce, 2005). "Despite the contraction in the high-tech industry during the recent recession, firms have continued to enter and expand their presence in e-commerce, and consumers have increased the number of purchases made online. As e-commerce grows, so will its impact on the overall economy" (Willis, 2004). One of the main drivers behind the growing success of e-commerce is online auctions. A growing amount of people interacts with online auctions on a regular basis. The consumer-to-consumer based auctions have become one of the most successful methods of electronic commerce (Zhang, 2006), such as including eBay.com, Yahoo! Auction, and Amazon Auction. One special case is eBay.com, which has grown to become the most popular online auction website (MarketingVOX, 2006). With up to 57.6 million visits in September this year (Internet Retailer, 2006), eBay leaves all competition behind. The question arises: Should eBay fear for more threatening competition in the future?
To investigate this dilemma, this paper analyses in depth the functioning of internet auctions in general and specializes on eBay and its competition. Section 2 clarifies the definition of internet auctions and their functioning, and describes the position of the internet auction market. Section 3 reflects on the relation between the classical model of supply and demand and auctions, discussing similarities and differences. Section 4 discusses the typical bidding behavior of eBay users by analyzing possible positive and negative implications. ...