The Regulation of All Pay Auctions: Is There Need for Greater Regulation of Online Auctioneers?

Abstract

Auctions are a ubiquitous process, with auctioneers playing a critical role in serving as a bridge between buyers and sellers, and as such assisting in the process of price discovery. Given this critical role, the regulation of auctions and auctioneers is of particular concern. The emergence of online selling has raised a number of pertinent questions about how the industry should be regulated. In particular so - called penny auctions (in economic parlance “unit bid auction”) have raised a number of pertinent questions about consumer protections. Whether these online selling models constitute auctions, and whether they mirror “bricks and mortar” rivals remain pertinent questions. Moreover, the adequacy of the regulatory apparatus that moderates the activities of auctioneers operating within conventional “analogue markets” is uncertain when such apparatus is applied to “digital markets” involving online selling through auction like processes. The current study considers need for regulation of unit bit auction in light of the underlying economics of such auction models. The model suggests that enhanced disclosure and greater regulation may ultimately be necessary.