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Online Auction Fraud: An Empirical Analysis of Shill-bidding Practice
Darlene Bay, Brock University
Alexei N Nikitkov, Brock University
ABSTRACT. The classical auction literature often ignored fraud (Milgrom and Weber 1982) or considered the potential to commit fraud to be quite low (Vickrey 1961, Chen and Tauman 2006). However, technology in online auctions may have increased the ease with which fraud can be perpetrated and thus its importance to the online business environment. This paper investigates shill bidding (the practice of surreptitiously bidding on one’s own auction in order to increase the final selling price) in an online auction. We present a five stage algorithm for identifying cases of shill bidding and apply the method on a sample of eBay transactions in order to determine how often shill bidding happens, what types of sellers are most likely to engage in this practice and what strategies are used.
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