Summary

We have discussed different aspects of online auctions. Of course this is a broad subject however, we focused on the most important factors regarding this subject.

Six different versions of auctions were discussed;

1. Public outcry also known as English Auction

2. Dutch auction

3. Sealed Bid Frist Price auction  

4. Sealed Bid Second Price auction also known as “Victory auction”

5. Chinese auction also known as “Tricky Tray” or “Pick-a-Price”

6. All Pay auction

Additionally, we have reviewed different bidding types;

1.     Penny Auction

2.     Beginner Auction

3.     Peak Auction

4.     Cash Back Bidding Auction

5.     Seat Auction Bidding

6.     Scratch Auction Bidding

Matching auctions with bidding types will result in a vast array of options. Although, very different all auctions have the same outcome.

Further, we have discussed the typical key websites (Quibids, Beezid, Ebay, Amazon, etc) and discussed the various types of auctions these websites utilize and the advantages and disadvantages of each.  Advantages of using online auctions include being able to add additional sales outside of a business’s traditional sales model, controlling prices through minimum bids to help cover cost, a cutting down of distribution costs overall, as well as open up to new international markets a business would otherwise find themselves not included in. These advantages to using online auctions also come with their share of disadvantages however, including; buying and selling fees, lack of autonomy and customization of goods, and online fraud.

Lastly, con artists are finding new ways to con people. An example of fraud it overpayment fraud in which a buyer gives a seller an counterfeit check of an amount higher than the value of the item and then asks for the amount difference to be returned to them with the order. This attacks the seller and not the buyer. An example of fraud that affects the buyer is a wire transfer scheme. This is where an item is sold and the buyer is taken to a wire transfer site and never hears from the seller again. Second chance schemes target losers of the bids and give them a similar product with a discount but once the person has paid they also never hear from the seller again. The only way to prevent these acts of fraud for the bidder to check on the seller and vice versa as well as using a secure payment method such as PayPal. Companies prevent fraud by using a firewall and an SSL which checks to make sure the site is trusted.

Online auctions are a great example of businesses adapting to an expanding international market. It’s not only allowed smaller businesses to expand their distribution pool but has also allowed for domestic goods to be easily assessable on a global market. Online Auctions allow for a typical online user to instantly have access to either buy or sell goods on a rapidly expanding market and while fraud may be the information systems number one threat, education can allow for safe navigation through this new market offering massive potential. Through using secure accounts, prepaid card and remembering to stay safe, online auctions could prove to be a great asset to your marketing needs. Happy bidding!

Fraud and Fraud prevention

Our last blog discussed how IT systems improved online auctions and fleshed out advantages as well as disadvantages. One disadvantage is fraud. It is very frustrating and causes great inconvenience. We will discuss the types of fraud, how both the user and company can take measures to prevent criminal activity as well as other factors that contribute to the subject.

Online auction fraud is an easy way for a con artist to make a decent sized profit. There have been multiple cases where the buyer of the product was taken for a large amount of money and only received a phone book or stacks of paper in return. Sources state that online auction fraud is not necessarily on the rise but rather that the con artists are becoming cleverer with their methods. Even though it may not be a growing threat, online fraud has been trouble for many online buyers and the auction websites are not doing anything about it. eBay and Yahoo have received many reports of potential fraud from those who have fell victim to it in the past but fail to act on any credible leads.

As stated con artists are becoming cleverer and are thinking of new ways to con people. Here are some ways the scheme are pulled off. Multiple types of fraud have been perpetrated through the use of online auctions. One example is overpayment fraud which targets the seller of a product as opposed to the buyer. A buyer will contact the seller of a high vale item and presents payment as a counterfeit check or money order that exceeds the value of the item. The buyer will then ask for the difference in in the order to be returned to the buyer. Wire transfer schemes involve the sale of high value items on established auction sites. When a buyer tries to purchase the product, they are redirected to w money transfer site which accepts the money order. After payment is received the buyer does not hear from the seller again. Second-chance schemes work in a similar manner but target losing bidders instead. These bidders are targeted and offered another product at a discounted price. Once again, after payment is received, the buyer will no longer here back from the seller.

To prevent fraudulent cases user should be more skeptical and educated themselves on this matter. Here is a list that can help the user avoid the attempts of fraudulent activity. This is not a exhaustive list however, these are very important factors to consider. 

- Fully understand how the auction works and the seller and buyer obligations. 

- Review the do's and don'ts before engaging in an auction. 

- Examine the feedback from the seller.
- Other than feedback, learn as much as you can about the seller. If it is a business check the Better        Business Bureau.
-Use Paypal or another form of secure payment instead of using a debit or credit card.
- Educate oneself on the actions the company take.

Companies also came up with ways to prevent fraud. Microsoft defines a firewall as software that helps protect computers against hackers, viruses and worms that try to attack the computer through the internet. DigiCert defines Secure Socket Layer (SSL) as a standard security technology for establishing an encrypted connection between a server (website) and a client (browser). This encrypted connection allows customer information such as credit card numbers, social security numbers, and login credentials to be transmitted securely. Data sent between browsers and web servers unencrypted is vulnerable to being intercepted, allowing attackers to steal personal data. Customers can determine a website is using SSL when the web address begins with https:.

SSL works in the following way:

* The web browser sends a request to the website secured with SSL (https) asking the site to identify itself.

* The website sends its SSL Certificate, including the its public key.

* The browser checks the certificate against a list of trusted certificate and checks to make sure the certificate has not expired. If the browser trusts the website it creates and sends a session key using the website’s public key.

* The website decrypts the session key using its private key and sends back an acknowledgement encrypted with the session key. This begins the encrypted session

* The website and browser encrypt all data with the session key.

Encrypted email works much the same way. Encrypted email messages require both the sender and the receiver to share to share their public key. Many online auction sites use encrypted email to communicate with customers.

Other than steps provided for the user or company there are a few ways to prevent such criminal activities including law enforcement. The FBI will continue to investigate these fraudulent cases and chase con artist until their operations are stopped. Online auction fraud will continue to plague auction websites and buyers on those sites until the companies themselves start to help exterminate the con artists and their methods from the internet.

- http://www.fbi.gov/news/stories/2009/june/auctionfraud_063009

-  http://www.nbcnews.com/id/3078737/ns/technology_and_science-tech_and_gadgets/t/auction-fraud-rise-some-say/#.VEbcS_ldVyI

- https://www.digicert.com/ssl.htm

- http://pages.ebay.com/help/account/safety.html

- http://www.microsoft.com/en-us/default.aspx

How information Systems improve Online Auctions 

One disadvantage that some people face when using online auctions if fraud, this comes about by not being able to see and evaluate the item in person. Online reputation systems help to prevent fraudulent auctions on the site. The systems help improve customer confidence when purchasing an item online. Also by using the data from reputation systems, companies can better prepare for and prevent fraud in an online auction website. Server-side Activity-based Caching is used to improve the auction systems by tracking and storing data about actions such as number of bids placed or the amount of time remaining until an auction is closed. This is to assist in the specific workloads and user behavior characteristics of online auction sites. When businesses set up online auctions policies and procedures can be broken. Information systems can be used to ensure policies and procedures are followed online such as a code of ethics. There are models being proposed that would help online auction sites support, monitor and enforce ethical conduct in an online environment.  

Disadvantages of Online Auctions 

You would think that businesses wouldn’t be able to find any cons when it comes to online auctions right? You would think that online auctions would be a solid alternative to conducting business right? Well the truth is there are many cons when it comes to businesses using online auctions. The fees associated with buying and selling items on online auctions are obviously a disadvantage to using online auctions. Businesses have to make a profit to stay in business right? So companies are forced to charge a little more than what they would like in order to remain profitable due to the fees of posting items. That’s just one of the many different disadvantages of using online auctions. Another major disadvantage of online auctions is the lack of autonomy or customization of the listings; again the online auction site handicaps the seller’s ability to fully advertise their products. Online auctions aren’t the new thing anymore, and have lost their edge or “it” factor. It’s best to do your research before conducting business on online auctions now-a-days, you never know where you can make or save the most money. Which is why businesses are using information systems to better online auctions for them and the customer.

Advantages of online Auctions

Of course if there are disadvantages there should be some advantages. One would be that businesses who use online auctions do not have to quit their traditional sales method which could lead to having extra sales so their surplus inventory would become smaller. Also when using online auctions businesses can set the minimum bid so that an item can be sold covering its cost.Using an online auction small businesses can cut down on distribution costs. Businesses can use online auctions to be more global or get international markets they otherwise would not have. New businesses can establish a market price through online auctions by figuring out what people are willing to pay for the item they offer.

Sources

 http://dl.acm.org/citation.cfm?id=1278063

http://link.springer.com/article/10.1007%2Fs11280-006-0011-8

http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=20&ved=0CFYQFjAJOAo&url=http%3A%2F%2Fwww.irma-international.org%2Fviewtitle%2F5118%2F&ei=4Uo0VMi6KsunyATsyIHwDw&usg=AFQjCNG4JUGRgW6TKbkVRhlZ6tjr2RELzQ&sig2=xfgeFSTG7Nx-u8bvleHe1Q&bvm=bv.76943099,d.aWw

http://techzonics.com/online-auction-site-blues.htm

http://www.referenceforbusiness.com/small/Mail-Op/Online-Auctions.html

Types of online auctions

There are a number of online auctions available for use however, six will be discussed. First on the list is the Chinese auction. Other names known for the auction are "Tricky Tray" and "Pick-A-Price." During this auction bidders purchase tickets. After final bid the party with the most tickets is the winner. This auction is usually held at fund raising or charity events.

Outcry auction also known as English auction is the most common auction. Prior to bidding a reserved price is set. During the auction each bidder raise the price in a ascending manner until there is one bidder remaining or time runs out. The remaining bidder or person with the highest bid is awarded the item. However, if reserved price is not met the owner of the item has the right to decline the offer. A Dutch auction is very similar to a english auction wIth the exception of price. Instead of price increasing price descends. 

During Sealed-bid first price auction all parties bid simultaneously. Once the competitor have made their Bid on the good other parties involved can rapidly decide on whether or not to keep bidding. The party with the highest bid wins. Sealed-bid second price auction also known as Victory auction is similar to bid first price. The only difference between the two is the winner doesn’t pay the highest price instead bidder pays the second highest price. All-pay auction requires bidders to pay the set amount regardless if party won or not. 

Beyond the many different types of online auctions in use today, you can also take into account a vast array of different bidding types available to users ranging from penny by penny bids to cash-back bids.

Bidding types include:

• Penny Auction – A very common bidding type made popular by sites such as Quidbids and Beezid. In this bidding type users buy a package with a preset number of bids. The user can then use these bids to raise the price of an auction penny by penny. Typically each bid will reset the timer on the auction. The auction will then expire when no more bids are place and the timer reaches zero.

• Beginner – When a beginner bidding option is offered, new users can enjoy lower bids at a lower account amount. Typically these offers will last for only a set period of time and sometimes expire after the first auction is won by the user.

• Peak Auction – In a peak auction, bidding is only allowed during hours predetermined by an administrator most often during the peak times of online traffic.

• Cash back bidding – In Cash back bidding the winner of the auction will get back 100% of the money he/she has used to place their bids. The second bidder then gets back 50%, while the third receives 25% cash back.

• Seat Auction Bidding – In seat auction bidding, a user pays for a “seat” in the auction rather than a package of bids. After purchasing a seat for a predetermined amount set by an administrator, once bidding opens a user will be allowed to make unlimited bids at no further charge until the auction closes.

• Scratch Bidding – In scratch bidding users do not make bids but rather “scratch” at the set price to reduce it by certain increments. The auction will not display the ending time and the last person to have scratched by the end of the auction will be set as the winner.

Sources

 http://www.unieauction.com/how_itworks/bidding-types.html

http://www.referenceforbusiness.com/small/Mail-Op/Online-Auctions.html

Online auctions and Perks

Online auctions is a very broad topic because it does not focus on a particular item. Online auctions have grown to produce large corporations such as eBay, Yahoo, and Quibids. This blog will cover the types as well as logistics of online auctions. Online auction is a very profitable way to sell and obtain goods at a competitive price. It is much more convenient than leasing office space. Additionally, online auctions expose the product or service to a global marketplace instead of being confined to a local market. To increase profit, sellers could potentially get involved in fraudulent activity. Such activities include receiving money from buyers and not sending product or sending a less desirable item. To combat this issue software has been implemented by organizations to identify users practicing collusion. Taken this into account corporations have introduced an advanced system to prevent crimes e.g. shill bidding. Shill bidding is a seller that has someone bid on their item to increase price.

How does an online auction work?

An online auction begins when a seller lists an item and sets a specific amount of time the item must be sold. Next, a buyer may submit a reasonable price for the item. After time runs out the buyer with the highest bid wins the auction and is required to submit payment to the seller. When payment is received the seller sends the item.

Some questions that will be answered in future blogs are the types of auctions that are available to the consumer. The pros and cons businesses encounter through online auction sites. How corporations use software to manage the different processes of the establishment as well as prevent fraudulent activity. If there are any more questions that needs to be addressed feel free to post them in the comment section of the blog.