Shill Bidding in Online English Auction

Abstract

Shill bidding has substantially increased with the explosion in the number of online auctions. Shill bidding in English auction is the use of insincere bids on seller's behalf to artificially drive up the price of the listing. In an independent private value (IPV) English auction, the seller can increase his expected profit by shill bidding by W.L. Wang et al. (2001). This paper presents a quantitative analysis about dishonest seller's extra expected profits from shill bidding and extends the shilling strategies into a more complete seller's strategy in English auction. Moreover, a qualitative analysis about the effect of shill bidding on the profits of both bidder and seller is also presented. Shill bidding may also benefit bidders. The variation of conclusion in the real world is influenced by relaxing some assumptions.