Every year the people of planet Earth generate about $125 trillion worth of stuff. So, what do we do with last year’s multi-trillion dollar accumulations? For 135 million of us, the answer has been to sell $4 billion of it on eBay. Since Iranian computer programmer Pierre Omyidar founded the website in San Jose, California, in l995 by selling a broken laser printer for $14.95, eBay has become the ultimate garage-emptying recycler.

Yet eBay has grown into far more than an online auction house where folks can pick up a few bucks for their used goods. Kenneth Steiglitz, computer science professor at Princeton University, insists that for millions of people eBay provides entertainment and the addictive excitement of wheeling and dealing, all of which he explains in his new book “eBay and Human Behavior: Snipes, Shills and Sharks.” The New Jersey chapter of the IEEE/ACM has invited Steiglitz to detail his theories and anecdotes on Thursday, April 17 at 8 p.m. at the Sarnoff Center. The event is free and open to the public. For details call 609-587-1886.

If one were browsing Steiglitz in the library card catalog, one would more typically come upon such titles as “Combinatorial Optimization: Algorithms and Complexity” or “An Introduction to Discrete Systems.” He is, after all, a scientist who has delved into computer frontiers since the days of the vacuum tube. Steiglitz grew up in western New Jersey and graduated with a bachelors degree in electrical engineering from New York University. He remained at NYU, completing his doctorate with a thesis in digital signal processing. “I was warned back then that such an event would take rooms full of machinery,” says Steiglitz. “I remember telling them ‘just you wait.’”

The whole Steiglitz family considers eBay a major computer site in their browsing. Ken’s wife, Sandy who hosts WPRB’s “Sunday Morning Opera with Sandy” (6 – 10 a.m.) says, “Oh, I find it a necessity for finding my old opera albums.” Ken feeds his numismatics collection, particularly Roman and Greek coins via eBay. Their daughter, Bonnie, recently unearthed a shill — eBay’s term for a user who, in cahoots with an auctioner, artificially drives up the price of an item.

Steiglitz even teaches a course on electronic auctions at Princeton. “For those who study human/economic behavior, eBay has provided a wealth of data that just hasn’t been available before,” he says. There must be something that explains a rare baseball card being bought for a whopping $1.2 million, and the hundreds of people bidding hundreds of dollars for a sacred plastic cup once sipped by Elvis (some water still remaining.)

The eBay design. There are many kinds of auctions, each carrying its own excitement of the unknown and breathless anticipation. Some of the more popular include the sealed bid auction where bidders individually put in the highest amount once, and unbeknownst to any other bidder. The lucky winner pays his full bid price. More personal is the English auction with its ascending price, competitive vocal bidding, and the final gavel calling for full price payment.

Gathering the best of all styles, eBay holds its auctions with early bid encouragement and rapid deadlines, all aiming at a high turnover rate on the site. An eBay auction mimics the English, ascending bid style, but with a few twists. The item winner pays only the second highest price, not the price he bid for. And eBay shows only this second highest price on the site at any time, plus one bidding increment. You never see the highest bid. Meanwhile, the countdown clock to deadline is up and ever ticking.

“There is a baseline auction theory,” says Steiglitz, “that if everybody involved acts rationally, each type of auction will sell a particular item for exactly the same price.” This sounds fine, but researchers have yet to find a single auction in which all parties acted rationally.

Sniping for profit. Labeled by many as greedy, unfair, and a spoiler of the game, the snipe is simply a person who swoops in with the highest bid in the final seconds. Keeping one eye on the rising bidding, and another on the deadline clock, the snipe plans that exact final moment in which he can post his bid, before anybody else can react, thus netting him the prize. For those who have not neither time nor inclination for such bleary-eyed clockwatching, there are even services, for example, snipe.com., that will, for a small percentage, do it for you. Snipe bids typically are made within the last two to eight seconds.

Generally, sniping is deemed the most profitable way to go. But you can get caught. Since you are never seeing the actual top price, your snipe bid must ever be a guess. As eBay advises, better to bid early and often. It works for them anyway.

Fear, frenzies & bubbles. “There is very little altruism in eBay auction bidding,” says Steiglitz, “but there is a wealth of emotion.” Prime among these is fear, which may for the sharp speculator provide a great tool. Following a series of consistent, but small-increment bidding, an individual might plunge in with a high bid. Frequently this will scare other bidders away, assuming that the plunger so desperately wants the item he will ever exceed the low-buyers’ bids. But this can backfire, particularly in the case of collectibles. Seeing a simple Chinese vase suddenly jump from $10.50 to $2,000 sets dealers and collectors on alert. Maybe this thing is a Ming. This may lead to a bidding frenzy.

With a bidding frenzy everybody, even those not interested in collecting, hops the bandwagon and puts in his two cents. This creates a huge bubble in which the price, temporarily, far exceeds the item’s value. In 2004 a partially eaten grilled cheese sandwich supposedly bearing the likeness of the Virgin Mary sold for $28,000. This is scarcely a new phenomenon. Steiglitz likens these eccentrically overpriced eBay transactions to the 17th century Dutch Tulip Mania in which an entire ship would be traded for a single tulip bulb.

Trouble is, bubbles are brief. In the end they collapse. Tulip mania left Holland in a depression from which it took a century to recover. “An additional engine to the bidding bubble is plain old human spite,” says Steiglitz. “We just love winning and will often risk a real personal hit just to either get the item for ourselves or drive the competition up onto the stratosphere.”

Enter the shills. Typically an agent of the seller, shills are those quiet individuals in sunglasses who drop in a bid at opportune moments to boost real buyers to a higher price. Such characters abound at modern auction houses and sometimes they are not even present. “Taking a bid from the chandelier,” is a familiar Sotheby’s term for the seller’s having the auctioneer drop in a prearranged, false bid.

“You can sometimes spot shills on eBay,” says Steiglitz. “They have certain behavior patterns.” When you see a bidder who has a small number of transactions, all bidding for one seller’s items, and constantly failing to win the bid, you probably have unearthed a shill.

Another shill type, abounding on eBay is the collective shill. In the early 1800s, the five major English antiquarian book sellers would elect an agent who would buy all the valuable books at an auction. He would then arrive at a local tavern where the five major sellers would gather and divvy the spoils with a second auction amongst themselves, keeping their corner on the market.

Such dealer-to-dealer favors are very much part of the eBay game.

Yet one of the wonderful things about eBay is its open invitation. There definitely is room for the sharks and professional collectors to speculate and make their profits. There is room for the Millstone music teacher who wants a low-cost “Fiddler On the Roof” backdrop for his eighth-grade production. And there is plenty of play space for folks to just browse around and see what they want to transfer from your garage to theirs.

With all this data eBay provides on human/economic behavior, one would think we could draw some lessons for our national and global economic picture. But apparently not. “We haven’t yet been able to figure out and predict the twitches in the eBay microcosm,” says Steiglitz. “So there is really no way we are going to translate them to the macrocosm of the whole world.”

In the meantime, the Steiglitzes will keep hunting for their coins and opera albums, and like so many other millions, having a ball fun doing it. — Bart Jackson

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