International Journal of Information Management 22 (2002) 127–142

A study of online auction sites in Taiwan: product, auctionrule, and trading type

Kai Wang*, Eric T.G. Wang, Chi-Feng Tai

Department of Information Management, National Central University, Chung-Li 320, Taiwan, ROC

Abstract

As the Internet grows rapidly, traditional transaction mechanisms like auctions have been imported tothe online world. This study focuses on online auction sites in Taiwan, investigating products, auction rules,and trading types adopted by these sites. Based on the three layers of value creation in the Rayport–Svioklamodel, results from the 25 sites show that brand-new products are offered more than used ones, and easilydescribable products are more popular. For auction types, English is the most common one. On the otherhand, consumer-to-consumer (C-to-C) trading types are more popular than business-to-consumer (B-to-C)counterparts. Also, most auction site owner’s act as intermediaries only. With respect to product delivery,participants usually have to manage the delivery process themselves. The cross-analyses between tradingtypes and product types and between roles of site owners and number of product categories provided arealso conducted. Managerial implications and future research directions are discussed.r 2002 Published byElsevier Science Ltd.

Keywords: Internet; Online auction; Trading type; Rayport–Sviokla model

1. Introduction

An auction market is a place that simultaneously provides centralized procedures to all marketparticipants for purchase and sales orders (Lee, 1996). In auction markets, trading participants’interactions and transactions are governed by specified procedures and rules (Klein, 1997).Auction markets differ from market maker markets in that in the latter, bids and offers submitteddepend on the role of brokers, making direct order matching impossible (Picot, Bortenlaenger, &Roehrl, 1995; Lee, 1996). However, in auction markets, the need for intermediaries or brokers tolocate compatible orders may be eliminated, meaning that two orders may directly meet in themarket (Picot et al., 1995).

*Corresponding author. Tel.: +886-3-4267265; fax: +886-3-4254604.

E-mail addresses: kwang@im.mgt.ncu.edu.tw (K. Wang), ewang@im.mgt.ncu.edu.tw (E.T.G. Wang),

jeffery@im.mgt.ncu.edu.tw (C.-F. Tai).

0268-4012/02/$ - see front matter r 2002 Published by Elsevier Science Ltd.

PII: S 0 2 6 8 - 4 0 1 2 ( 0 1 ) 0 0 0 5 0 - 0

The emergence of the Internet allows direct contact between buyers and sellers (Benjamin &Wigand, 1995; Wigand & Benjamin, 1995; Choi, Stahl, & Whinston, 1997), and makesitself a suitable and popular place for conducting auctions, which are usually called onlineauctions. The popularity of online auctions is evidenced by the lists provided in directoriessuch as Internet Auction List (http://www.internetauctionlist.com/) and AuctionGuide.com(http://www.auctionguide.com/), and according to Nielsen NetRatings (2001), auction sitesgrossed record revenues of 556 millions in May 2001. Unlike traditional auction markets that onlydeal with limited (or specific) categories of objects, online auction markets provide theopportunity of buying and selling almost all kinds of products. Consequently, onlineauction has also become a topic receiving much research attention, e.g. Rachlevsky-Reich, Ben-Shaul, Chan, Lo, and Poggio (1999), Teich, Wallenius, and Wallenius (1999), and Budish andTakeyama (2001).Take the famous Internet auction site, eBay (http://www.ebay.com/), for example. eBay ranks

No. 1 in Time magazine’s choice of best cyber-technology in 1999 (Anonymous, 1999) andprovides items for sale in more than 4500 categories, with over 600,000 new items everyday.1

Consequently, eBay has even been described as an economic phenomenon second to the stockmarket (Anonymous, 1999). There are many online auction sites other than eBay on the Internet,and they sell products in various categories, like antiques, books, computers, real estates, etc.With this number of choices, online auctions have not only changed the parameters of traditionalauctions, but also provided the sellers with more degrees of freedom (Beam, Segev, &Shanthikumar, 1996). (In fact, what Beam et al. (1996) neglected is that not only the sellers butalso the buyers are provided with more choices and flexibility in an online auction site.)Compared with the rapid and prosperous growth of online auctions in US, what is the situation

in Taiwan? As the Net population exceeds three millions at the end of 1999 (NII SteeringCommittee, 1999), and as more people gradually get used to conducting business on the Internet,online auctions as a form of online transactions other than pure online shopping also growrapidly. This study investigates the characteristics of online auction sites currently operating inTaiwan, reporting what they trade and how they trade.Due to research limitations, this study focuses on the site owners’ perspectives only. Consumer

auction behavior is not the aim of this study. If possible, however, consumer behavior in theonline auction environment might also be an interesting topic for further research, since in such anenvironment traders do not meet each others face to face, making interpersonal interaction likeobserving others’ reactions impossible (e.g. Kambil & Van Heck, 1998).This study analyzes online auctions from the perspective of the Rayport–Sviokla model

(Rayport & Sviokla, 1994), which describes how customer value can be created in the marketspaceat three layers: content, context, and infrastructure. These three layers form the basis foranalyzing the operation of online auction sites in the study.The remainder of the article is as follows. In Section 2, auction types and online auctions are

introduced. Section 3 introduces the Rayport–Sviokla model, which forms the analytical basis ofthe study. Section 4 describes the sampling and coding procedures of the web sites surveyed, andSection 5 analyzes the data collected. Findings and results are discussed in Sections 6 and 7provides the conclusion.

1http://pages.ebay.com/community/aboutebay/overview/benchmarks.html, accessed July 9, 2001.

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2. Online auctions

Auctions have a long history in human society. An auction is ‘‘a market institution with anexplicit set of rules determining resource allocation and prices on the basis of bids from the marketparticipants’’ (McAfee & McMillan, 1987, p. 701). Such mechanism sets out rules for bidding andallocates the goods to a certain bidder based on the predefined rule set (Klein, 1997; Segev &Beam, 1998). Since the primary variable negotiated during the auction process is often price alone,it thus can also be viewed as a resource allocation mechanism for buyers and sellers to compete onprice for specific products (Bierman & Fernandez, 1993).Auctions proceed differently with different rules. In general, they can be divided into sealed-bid

auctions and open auctions. The difference between these two types of auctions is that in sealedauctions, competitive bidders do not know each other’s bids while in open auctions the biddersdo. Beam and Segev (1998) and Bichler and Segev (1998) summarize the auction types in eachcategory:

2.1. Sealed-bid auctions

First price sealed bid: Bidders submit their sealed bid for the item. The bids will be openedsimultaneously later, and the bidder who offers the highest price is declared as the winner. Thewinner pays at the bid price.

Sealed double auction: Buyers and sellers simultaneously submit bids. The auctioneer determinesa market-clearing price and matches the buyers and sellers.

Vickrey: Bidders submit their sealed bid in advance. The bidder who offers the highest price willbe declared as the winner, but he/she pays at the second-highest price. (Vickrey is similar to firstprice sealed bid except the price paid.)

2.2. Open auctions

English: Bidders continuously raise their bids during the auction process until only one bidderwith the highest price remains. During the process, bidders can see others’ bids and update theirsaccordingly. The one who offers the highest price wins and pays at the bid price.

Dutch: The auctioneer calls out descending prices, and the bidders have to decide whether theywant to buy at current price or wait until it drops to a lower level. The winner is the first bidder tocall out and pays at the current price.It is noted that in the study, the term ‘‘online auctions’’ refers specifically to the auctions

conducted on the Internet, although other forms of electronic or online auctions are possible, e.g.,the pig auction market in Taiwan and Singapore (see Neo, 1992), the Dutch flower auction market(see Heezen & Baets, 1996; Van Heck & Ribbers, 1996, 1997; Kambil & Van Heck, 1998), and theAUCNET in Japan (see Lee, 1997, 1998).Although most online auctions conducted on the Internet adopt traditional auction types, due

to the limitations of the network environment, slight modifications are common (Beam & Segev,1998). For example, in the traditional English auctions, bidders gather together for bidding. Inthat context, bidders may observe their competitors’ gestures or demeanors and then call out theirbids accordingly (and strategically, if necessary). However, with the introduction of information

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technology such as the video (e.g. Heezen & Baets, 1996; Kambil & Van Heck, 1998) and theInternet, the situation is quite different. Kambil and Van Heck (1998) argue that due to theincapability of capturing the nonprice information, the introduction of Vidifleur by FlowerAuction Holland was unsuccessful. To compensate for similar shortcomings, some online auctionsites allow or even encourage bidders to postmessages or comments regarding the bidding objectsor to their trading partners.In addition to interpersonal interactions, the bidding process of online auctions may also be

slightly different from the traditional ones. Take English online auctions for example, the closingof auctions is usually based on time (Turban, 1997; Beam & Segev, 1998). That is, the biddingcontinues, say, for a week. During the one-week period, bidders are free to call out and adjusttheir bid prices. At the end of the predetermined period, the bidding will be closed regardless ofwhether any bidders are still interested in calling out further bids.With the interesting and multiplicity shown in online auction sites, this study investigates

what and how online auctions trade with a focus on the sites hosted in Taiwan. Thefollowing section first introduces the Rayport–Sviokla model, which forms the analytical basis ofthe study.

3. Rayport–Sviokla model

Rayport and Sviokla (1994) emphasize the importance of information in the marketspacerelative to the traditional marketplace. Due to the separation of information about the productsor services from the physical product or service, information in the marketspace sometimes is ascritical for a company’s profits as the physical products or services. Taking the JapaneseAUCNET as an example, Rayport and Sviokla argue that the difference between the marketspaceand the marketplace is the separation of the three layers, content, context, and infrastructure, inconsumer value creation. The model proposed is depicted in Fig. 1.

Content

Context

Infrastructure

Marketplace

Content

Context

Infrastructure

Marketspace

Customers Customers

Brand Brand

Exchange Exchange

Fig. 1. Value creation in the marketspace. Source: Rayport and Sviokla (1994).

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These three layers represent the basic elements of customer value creation in the marketspace.According to Rayport and Sviokla (1994, p. 142), ‘‘in a information-defined transactionspace, customers learn about products differently, buy them differently, and have themdelivered differently’’. Thus, Rayport and Sviokla disaggregate customer value creation in themarketspace into content, context, and infrastructure. With the aids of information technology,marketers may bring values to their customers from these three layers separately, while in atraditional marketplace, customer value comes from the aggregation of these three layers.Newspaper is an example in the traditional marketplace, which customers cannot access thecontents without interacting with the context (e.g. format, political position, etc.) and theinfrastructure (delivered by the newsboy or bought from the newsstand). AOL, however, is anexample of value creation in the marketspace. It provides contents from numerous newspaperpublishers with customizable viewing context and numerous ways of online access (e.g. dial-uplines, LANs, etc).Mapping the model into online auctions, the top two layers, content and context, become

interesting and important. Content relates to the products that are bid, whereas context relates tothe circumstances of bidding, i.e., the processes in which online auctions proceed. With respect toinfrastructure, two issues are of concern: Internet connection and product delivery. Since the waysof connecting to the Internet are not limited and are usually not under the control of auction siteowners, they are not analyzed in the study. As for product delivery, this study will investigate theways the auction site owners manage the product delivery process, because it usually is an issuethat customers care about.During the coding process, we will focus on the content (products) and the context (process)

aspects of the online auction sites in Taiwan. With respect to the infrastructure, as mentionedabove, only product delivery is coded, according to whether the delivery is managed by theauction site owners or by the auction participants. Fig. 2 depicts the issues analyzed according tothe Rayport–Sviokla model.In Fig. 2, the values created by auction site owners can be seen as synthesized from the three

layers. In each individual layer, the analysis will focus on product types offered (content), trading

Value Creationof AuctionSite Owner

ContentProduct types and

categories

ContextAuction and trading typesand roles of site owners

InfrastructureProduct delivery

Fig. 2. Value creation in an auction site.

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types adopted (context), and product delivery mechanisms offered (infrastructure). Online auctionparticipants interact with the auction sites and variety in values created differ as each site ownerholds different policies in each layer. Differences in these policies will thus be analyzed in thefollowing sections of this paper. In the content layer, product types such as brand-new or usedones as well as product categories offered will be investigated. In the context layer, the focus willbe on auction mechanisms relevant to participant interactions, including auction types, tradingtypes, and roles of auction site owners. In the third layer, the infrastructure, attentions will be paidto how products are delivered to auction winners. The three layers and the issues investigated areseen as forming the basis for value creation of an auction site. Under that presumption, a contentanalysis of auction sites in Taiwan was conducted. The sampling and coding procedures of thestudy are discussed in Section 4.

4. Sampling and coding procedures

To obtain a list of online auction web sites as complete as possible, this study searched withthe keyword ‘‘auction’’ (in Chinese) using the following search engines: Yam (http://www.yam.com.tw/), Kimo (http://www.kimo.com.tw/), and Yahoo! (http://tw.yahoo.com/).These search engines were used because they are well known and thus hopefully could providea more complete list of auction sites. Data collection was conducted on January 21, 2000, and 82URLs were found. However, to get a valid list of URLs, the following conditions need to beconsidered:

(1) It is common for identical web site URLs to be registered in more than one search enginedirectories.

(2) Some entries in search results are actually hosted in Hong Kong or Mainland China. (Thelatter cases usually present GB-encoded web pages.)

(3) Some URLs may be out-of-date, and hence the sites may no longer exist.

With these conditions in mind, special checks were made to identify duplicate entries. HK- andMainland China-hosted sites and unavailable sites are discarded. Among the URL list, 35 areduplicated, five unavailable (host may be down or nonexistent), and five host in HK or MainlandChina. An entry recognized from its description as a British site was also dropped. Later duringthe process of this study, another 11 sites were also dropped from the list: nine because of not in abidding-style, one under construction, and one not providing online bidding. Excluding theseinvalid sites, 25 valid entries remained.For each auction site, information regarding both the products it offers and the process it runs

the auction were recorded. For products, each site was investigated for whether it provides used orbrand-new products; the availability of single or multiple product categories; and the list ofproduct categories. For processes, auction types used were recorded. Other recorded data includetrading types (C-to-C, B-to-C, or B-to-B), role of the site owners (intermediary/market maker orproducer), delivery methods, and evaluation policy.2 The coding form used for recording theabove information is available from the authors.

2The coding form used for recording the above information is available from the authors.

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5. Data analysis

5.1. The products

Of the 25 sites investigated, ten of them (40%) offer brand-new products for auction, nine(36%) offer used products, and six (24%) offer both. The used products typically are provided bythe registered members of a site instead of its owner, i.e., the members provide their used goodsfor sale via online auctions. As for the brand-new products, the site owner either is the produceror simply acts as a market maker who provide a place for running auctions. Table 1 shows thesummary of product types offered on those auction sites.With respect to product categories, seven sites offer only one product category, while the other

18 provide multiple ones. For those sites offering only one product category, the typical productsoffered include electronics and communication products, computer hardware, music CD’s, etc.Table 2 summarizes the product categories offered by the 25 sites investigated in the study.As shown in Table 2, Computer hardware/software, Electronics and communication products,

and Family appliances are the top three product categories offered on the auction web sites in

Table 1

Offered products

Frequency Percentage (%)

Brand-new 10 40

Used 9 36

Both 6 24

Table 2

Product categories

Frequency Brand-new Used

1 Computer hardware/softwarea 18 10 14

2 Electronics and communication productsa 18 10 14

3 Family appliances 18 9 15

4 Booksa 15 7 13

5 AV mediaa 14 9 11

6 Vehicles 14 6 13

7 Othersa 14 6 13

8 Collectibles and artsa 12 6 11

9 Travel and recreation 12 7 9

10 Jewelry and life accessories 12 7 9

11 Sports 11 7 9

12 Beauty and health care 8 6 7

13 Home and office furniture 7 3 6

14 Toys 7 4 6

15 Camera and equipment 6 2 6

16 Real estate 5 2 5

aCategories offered by one-category-only sites.

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Taiwan. Examining the product categories in Table 2 in rank order (excluding the row indicating‘‘others’’), an interesting observation can be made that, roughly, the higher the rank, the easierto describe the product specifications. That is, the quality of the products ranked higher in thelist tends to be more standardized and less influenced by personal tastes and experiences. Forexample, it is easier to describe the ‘‘specification’’ of a computer or a mobile phone than atravel plan. Thus, it is clear that online auctions are more viable for selling products thatare relatively standardized or easier to specify. This observation will be discussed further inSection 6.A cross-analysis of the types and the categories of the product shows that for both brand-new

and used products, those more commonly traded via online auctions roughly conform to the rankorder described above. On the other hand, Table 2 also shows that for all product categories, thefrequency of used products traded is higher than that of brand-new ones. In fact, since traditionalchannels for trading used products are limited, compared to those of the brand-new ones, itshould not be surprising to observe that online auctions have become a major channel for tradingused products.

5.2. The auction process

As indicated by other studies (e.g. Beam & Segev, 1998), English auction is by far the mostcommon auction type on the Internet. This fact is also revealed in Table 3, which shows theauction types adopted by the 25 sites surveyed. The other less commonly adopted type is theDutch auction, offered by only one site in our sample. The reason why English auction is sowidely adopted is probably due to its simple rules, making bidders easier to comprehend andparticipate in the auctions, especially for the novice participants.3 Also, since the possibility offraud is one of the major limitations of online auctions (Turban, 1997, National FraudInformation Center, 2000), English auction may have another advantage of building trust towardonline auctions for its openness in price information.Of the 25 sites surveyed, only one of them offers real-time online auctions. For this case, the

price shown in the web page varies by seconds, and buyers have to decide whether to buy aproduct at the price currently shown. Another interesting point is that 8 out of the 25 sites offerbidding prices starting from NT$1 (about US$ 3 cents). The $1 bidding price seems to be apopular strategy for online auction sites to attract more participants, even though the final closingprice is often close to the market price.For trading types, the sites are separated into C-to-C only, B-to-C only, and both (no sites

investigated in this study trade in B-to-B style). The difference between C-to-C and B-to-Cdepends on the provider of the products. If it is individuals who provide the products, then the siteoperates a C-to-C trading; if it is the auction site owner or other companies who provide theproducts, then the site operates a B-to-C trading. Among the sites investigated, eleven provide C-to-C trading, 10 provide B-to-C trading, and four provide both types (see Table 4). In a C-to-Ctrading, individuals offer the products to be traded, and the products usually are used ones. In aB-to-C trading, the products typically are brand-new, but not necessarily produced by the siteowner. Also, 23 sites act as intermediaries only and the other two are operated by the producers

3A site in our sample also indicates this point in their FAQ pages.

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themselves. That is, the 23 intermediary sites exist simply to offer a place to ‘‘facilitate’’ thetrading of the products, whether in C-to-C or in B-to-C styles, while the other two build onlinestorefronts to sell their own products.With regard to the evaluation policy of the auction sites, some auction sites provide evaluation

systems. With an evaluation system, auction participants may post personal evaluations to theirtrading partners, according to past trading experiences with them. Evaluations may be from eitherthe buyer-side or the seller-side, as shown in Table 5. Thus, both buyers and sellers may get anemail requesting for evaluation after each auction has been successfully closed. In some sites,participants may also give their evaluations at their own will on the auction web pages. There arestill some sites that even let the bidders postonline comments regarding a particular item, such astheir opinions or their begging for letting him/her win the auction.

Table 4

Trading types and roles of site owners

Frequency Percentage (%)

Trading types

C-to-C 11 44

B-to-C 10 40

Both 4 16

Roles of site owners

Intermediary/market maker 23 92

Producer 2 8

Table 3

Auction types

Frequency Percentage (%)

Sealed-bid auctions First price sealed bid 0 0

Sealed double auction 0 0

Vickrey 0 0

Open auctions English 25 100

Dutch 1 4

Table 5

Evaluation policy

Frequency Percentage (%)

Evaluation by sellers 9 36

Evaluation by buyers 9 36

Online comments 6 24

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5.3. Delivery of products

The delivery of products is important when the deal is made. If the auction site ‘‘guarantees’’the delivery of products, either by express delivery or by the producer of the products, then it iscoded as delivery by site owner. Otherwise, auction participants have to arrange the deliverythemselves. Of the 25 sites, only four manage/guarantee the delivery of products, including thetwo producers sites. The results are summarized in Table 6.

5.4. Cross-analysis

To gain additional insights into the data collected, the cross-analyses between the trading typesand the product types, and between the roles of site owners and the number of product categoriesprovided are conducted, which are shown in Tables 7 and 8, respectively.Comparing the products traded in C-to-C markets with those traded in B-to-C markets, C-to-C

markets provide more used products, while B-to-C markets provide more brand-new ones. Asmentioned above, the difference between C-to-C and B-to-C transactions lies in the role of theproduct providers. Since items provided by individuals are usually used, it is understandable thatmost products traded in C-to-C markets are used ones. On the other hand, in B-to-C markets, thehigher number of brand-new products comes from the fact that those products are provided bymanufacturers directly, or indirectly with site owners as intermediaries.Table 8 shows that most site owners who act as an intermediary provide more than one product

category. For those providing only a single category, five are intermediaries, and two are productproducers. In fact, the two product producers are also the only two producers who run theirauction site as an alternative distribution channel.For intermediaries, however, the selection of the number of product categories diverges. Some

choose only one, but some choose as many as 15. In fact, the number may be even higher if we diginto the ‘‘others’’ category. Of course, no matter how many product categories are provided, the

Table 6

Delivery of products

Frequency Percentage (%)

Delivery by site owner 4 16

Participant-managed 17 68

Unknown 4 16

Table 7

Cross-analysis between trading types and brand-new/used products

Brand-new Used

Trading types

C-to-C 6 15

B-to-C 14 4

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most important thing for the site owners is to attract as many online surfers as possible toparticipate in auctions and to build and enhance their trust and loyalty, so that the likelihood ofrepeated visits can be increased.

6. Discussion

Based on the findings described in Section 5, some interesting points emerge and are discussedbelow. The discussion is separated into four sections: product, auction rule, trading type, andautomated auction process.

6.1. Product

What are the popular or typical products offered in the online auction markets? As described byMalone, Yates, and Benjamin (1987), products with simple product description will have a betterfit with the market mechanism. Inspecting Table 2, we can also find similar facts. Since onlinebidders are unable to view, inspect, or feel the products personally, what make them decidewhether or not to bid the product at a specific price usually are some standardized and hence easy-to-recognize attributes, such as CPU clock speeds, hard disk drive capacities, mobile phonebrands and specifications, etc. These attributes form the primary cues that guide their decisions inthe auction process. Thus, products with easily described or standard specifications should bemore popular in online auctions. It is particularly true for used products. Consequently, it isnatural to see that products such as computers hardware/software, electronic products, and familyappliances are among the most frequently traded products in online auctions.Beam and Segev (1998) indicate the features shared by popular products offered by Internet-

based auction sites: (1) easy to describe and understand over the Internet; (2) easy to deliver; (3)medium-valued, more than a pencil, less than a house. Do services fit in online auctions?According to the data collected in this study, no site provides such a category. The study of Chuiand Zwick (1999) also shows that auctions for services are not as popular as other products. Suchfact may be due to the difficulty of quality assurance and the required timeliness of services.Compared with online shopping, online auction participants should have higher product

involvement (which enables them to determine the product quality and the appropriate pricelevel), hence how to make the products easily appraised and valued becomes important. Withhigher product involvement, the participants care more about the central cues of the products

Table 8

Cross-analysis between roles of site owners and number of product categories provided

Number of product categories provided

1 5 6 8 9 10 11 13 14 15

Roles of site owners

Intermediary/market maker 5 1 1 1 5 3 3 1 1 2

Producer 2

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(Petty & Cacioppo, 1984), meaning that the purchasing decisions are primarily based ondeliberate reasoning and thinking. Clear, concrete, and precise product descriptions may help inthat aspect.Another issue is the number of product categories provided in a site. As discussed in Section

5.1, seven sites offer only one product category. A further cross-analysis between the role of siteowner and the number of product categories reveals that for the sites that offer more than onecategory, all of them act as intermediaries. However, of the seven sites that offer only onecategory, two are product producers. This means that, in our sample, if the auction site is run bythe producer itself, the only products available are of their own brand. Chui and Zwick (1999)explain the selection of such focused strategy as caused by ‘‘the difficulty of sourcing too manytypes of merchandise’’ and ‘‘the importance of establishing the brand name among cyber-stores’’(p. 9). In fact, it is observed that the main reason should be those product producers see onlineauction simply as another channel for product distribution, an extension from the traditionalretailers. On the other hand, they also run the risk of competition if other brands are alsoavailable in their sites.Since differentiation as well as branding are important issues facing online auctions (Ellington,

Ficeli, Jaturaputpaibul, & Kellam, 1998), establishing a strong brand to differentiate fromcompetitors while at the same time enhancing consumer trust becomes important. This might bethe reason why those producers offer only their own products instead of carrying a broad rangeof product categories. Nevertheless, for other site owners who act as intermediaries, this shouldalso be a point that they cannot ignore. The difference, however, is that, for the site owners, thebranding issue involved should be establishing the brand of their sites rather than that of theproducts.

6.2. Auction rule

English and Dutch auctions are the only two auction types found in the sites surveyed.However, in online auctions, Dutch auction has been applied with a slight modification. The pricevariation loops in a certain range instead of continuously dropping down. As mentioned earlier,the reason English auction has been widely adopted may be due to its ease of understanding.However, the potential of Dutch auction should not be neglected. Since most online bidders areonly familiar with English auction, if with creative designs, Dutch auction may be anothermarketing strategy to attract more auction participants. As the bid price drops continuously, atwhat price should the bidder call out, not only to bid at the best acceptable price but also to be thefirst bidder to win the game? This type of auctions may be much more exciting and thus bringsmore funs into the auction process because a bidder does not know who his/her competitors are,nor does he/she know what these competitors are thinking because of the networkingenvironment. Thus, auction site owners may offer a product everyday as a ‘‘special offer’’ usingDutch auction, and see how the market responds so as to evaluate whether to adopt Dutchauction as one of the site’s normal auction strategies.With respect to the roles played by the auction site owners, it is obvious that most of them only

act as an intermediary or a market maker. They provide a ‘‘transaction space’’, acting as brokersbetween buyers and sellers, and usually are not involved in the physical delivery of products. Thatis, the owners conduct their businesses primarily in the content and context layers. Rayport and

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Sviokla (1994) have pointed out the possibility of mixing and matching content and context as acontent tie-in strategy to connect with consumers and raise their loyalty to a particular context.Once the loyalty has been built, ‘‘the potential for related transactions may be limited only by theimagination of the strategic members involved’’ (p. 149). For example, auction site owners maycooperate with producers to offer special product for auction each day or each week coupled withcreatively designed bidding methods such as the Dutch auction. Or, winners of each auction maywin coupons with face value determined according to the price differential earned during theauction process, which can be used in future auctions or in buying other products from theproduct producer. These strategies, in the hope of making a tie-in effect, may create opportunitiesfor site owners to build a community-like environment, attracting more participants andstrengthening their loyalty.

6.3. Trading type

The B-to-B trading type does not exist in the 25 sites investigated. Businesses usually have aformal policy and procedure for procurement, and hence auction may not be a viable source forprocurement because of the risks involved. Another reason might relate to the source from whichwe obtain the list of auction sites. Since most entries registered in search engines are usuallyconsumer-related, B-to-B auction sites are thus less commonly seen (Beam & Segev, 1998).Although B-to-B auction sites do not exist in our list, this however is not the case for sites

studied by Beam and Segev (1998) and Chui and Zwick (1999). Other than the two reasonsdescribed above, are there any possibilities that cause the difference? In fact, the industrialstructure and the relationships between businesses in US are quite different from those in Taiwanwhere trust and habit play a larger part in transactions. On the other hand, the real values that canbe gained from the Internet are unclear with the Internet applications still under development inTaiwan. Hence, it should be natural to rarely see B-to-B auction sites operating at this stage ofInternet development in Taiwan. For example, due to currently unsolved cash and material flowproblems in Taiwan, businesses would rather make a direct phone call or fax to get immediateservices than spend their time and efforts in the online world. It is not only true with the directgoods that are critical to manufacturing but also true with those indirect goods (MRO;maintenance, repair and operation) such as stationery. However, as the E-Marketplace conceptbeing promoted globally, the situation may change soon. In Taiwan, companies like Com2B(http://www.com2b.com.tw/), invested by Commerce One, Compaq and some local companies,will be in operation in the third quarter of 2000, aiming at building a global trading web (GTW4)in this area. Such B-to-B platform will be connected with other GTWs globally, providing anonline marketplace platform for trading. Other than Com2B, ecom Software (http://www.ecomsoft.com.tw/) and BeXcom Greater China (http://www.gc.bexcom.com/) are alsoaiming at building such centralized transaction platforms for businesses. In fact, once suchplatforms are widely accepted in the industry, the B-to-B auction may gain rapid popularity as amajor procurement mechanism for businesses.

4The GTW is a strategic vision and structure proposed by Commerce One, and is designed to be a global trading

community, creating access to worldwide markets and allowing B-to-B transactions to occur at any time and any place

in the world. Related information is available from http://www.globaltradingweb.net/.

K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 139

6.4. Automated auction process

Lastly, a special mechanism provided by several auction sites is noteworthy. Five of the auctionsites investigated in this study allow bidders to activate automatic bidding. Automatic bidding is amechanism in which bids are automatically placed with lowest increments. Participants set theirhighest acceptable price first, and then the ‘‘bidding agent’’ or ‘‘bidding wizard’’ will automaticallyplace bids with minimum increments if any other participant had placed a bid higher than theagent’s previous bid. The agent continues to work until it wins the auction or the highestacceptable price has been reached. With automatic bidding, participants have a greateropportunity of winning an auction at the lowest possible price, while no longer having to careabout the current status of bidding once the bidding agent is configured properly. This eases theworkload and the cost of participation in bidding, and should be more popular in the future.

7. Conclusions

The popularity of Internet continues to grow, forming an arena called electronic marketspace.The Internet has become a new battlefield in which new forms of transactions are conducted.Among them, auctions are an example. Auctions have existed for a long time in human history,and in the Internet world, they can also play an important role in online business. This studyfocuses on online auctions in Taiwan, investigating how online auctions have been applied in thisarea and providing implications of online auctions based on the Rayport–Sviokla Model(Rayport & Sviokla, 1994). It should be noted that due to the rapid growth of the Internetapplications, the list obtained in this study would never be complete at any time. Nevertheless theydo provide a view or a trend that enables us to gain insights into how auction mechanisms havebeen utilized in the cyberspace. With such limitation in mind, managerial implications and futureresearch suggestions are provided below.

7.1. Managerial implications

Analyzing from the content, context, and infrastructure layers, this study investigates howonline auction web sites are operated. The result of the analysis not only helps to understand thestatus quo, but should also be able to provide some implications for practitioners. First, withrespect to the products, auction site owners should pay attention to what products to be offeredon their site. The rifle strategy, accommodating as many categories as possible, may on the onehand widen consumer choices, but may on the other ruin the site’s reputation once entanglementsare aroused due to product description indeterminacy.Second, although English auction is the most widely adopted auction mechanism, Dutch

auction, another type of open auctions, may also be implemented as a marketing strategy to makeparticipants feel different. With more variety in auction mechanisms, Net surfers may be moremotivated to participate in online auctions.Third, auction site owners may try mixing the content and the context to formulate competitive

strategies or to gain competitive advantages. Returning back or discount coupons as mentionedpreviously may be a choice. Combining the content and the context creates a tie-in effect,

K. Wang et al. / International Journal of Information Management 22 (2002) 127–142140

attracting more people to continuously participate in the auctions for whatever they may need.Hence, owners should first conduct an in-depth analysis of their own sites to discern thedelineation and opportunities between the two layers, and then carefully design and implementthe most suitable auction strategy.

7.2. Future research

This study focuses on auction site owners’ perspectives. Future research may investigate howconsumers act differently in the online auction environment. The analysis of consumer behavior inonline auctions should also be of interest to researchers because of the differences between onlineand traditional auction circumstances. For example, online action, ranked No. 1 of Internetfrauds in 1999 and 2000 (National Fraud Information Center, 2000), may be an important issue tostudy in the online environment. Plenty other issues, such as the setting of buy prices, are worthyof investigation (see Budish & Takeyama, 2001). Obviously, related research will not be replete ifonly one side is emphasized or paid attention to. With gradual accumulation of research results, amore thorough understanding of online auctions should result.Another possible future research direction is to perform comparative studies across different

areas. In this study, we focus on online auction sites in Taiwan only. Researchers andpractitioners may be interested in investigating the differences in content, context, andinfrastructure adopted by auction sites in different areas or countries, taking into account thedifferences in cultures, industrial structures, interorganizational relationships, etc. Such anapproach should be able to provide a more complete picture of online auctions on a global scale.

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Kai Wang is a doctoral candidate in the Department of Information Management at National Central University,

Taiwan (ROC). He received his M.S. degree in Business Administration from National Central University. His research

interests include issues in electronic commerce, Internet marketing and consumer behavior, and organization theory.

Eric T. G. Wang is a professor in the Department of Information Management at National Central University, Taiwan

(ROC). He received the Ph.D. degree from William E. Simon School of Business Administration at University of

Rochester. His research interests include information systems economics, impacts of information technology,

outsourcing and Internet marketing.

Chi-Feng Tai is a doctoral candidate in the Department of Information Management at National Central University,

Taiwan (ROC). He received his M.S. degree in Business Administration from National Central University. His research

interests include issues in supply chain management, organization theory, and transaction cost economics.

K. Wang et al. / International Journal of Information Management 22 (2002) 127–142142