Lec 4 - Lecture 4 09/13/10 Team 4 Kari Karlsson, Kellie...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Lecture 4 09/13/10 Team 4 Kari Karlsson, Kellie Jue, Karin Vernooij, Jooho Lee, Vladmir Vakulenko I. Announcements 1. Teams should start looking for a potential target for the project. 2. Mid‐term will be held in mid‐ to late October in class. 3. Start reading cases. II. eBay 1. Types of auctions: A. English Auction: the typical style of bidding in the common place B. Dutch Auction: gradual lowering of the price until the first buyer appears C. Sealed‐bid first price auction: bidders submit sealed bids and the winner with the highest bid price pays the bid price he/she submitted D. Sealed‐bid second price auction: Same as above except the winner pays the second highest bid price 2. Issues of eBay (Rationale behind online rating system): A. Quality of service B. Possible frauds C. Lemon’s Market III. Lemon’s market i 1 2 3 4 5 6 7 8 9 10 qi 0.1 0.2 0.3 … … … … … 0.85 0.95 • The buyer is willing to pay q x 1,500 (0 = bad quality, 1 = good quality. Uniform distribution) • A seller is willing to sell at q x 1,000 • The sellers know the qualities of each car and the buyer knows the average quality of the cars. • Let’s say q = 0.5 • The buyer would then be willing to pay 0.5 x 1,500 = 750 for a used car. • Seller 10 is not willing to make the sale, because he wants 0.95*1000=950 • But if Car 10 is gone and the average quality q will be even smaller, and as a result, more sellers will walk away. When this process is repeated over and over, the market will eventually crash. IV. Professor Shen’s Double Auctioning Model • Each buyer and seller enters the markets with bids/asks, respectively. • We can rank the prices in the descending order for buyers and in the ascending order for sellers as shown in the figure. • Transactions and matching will take place for the sellers and buyers above the cutoff line (in red). Buyers who submit a bid that’s too cheap and sellers who submit an ask price that’s too expensive will not be able to participate in the transaction and matching process. • Matching based on a mathematical formula takes place such that the buyers get prices lower than their highest bidding price while the sellers sell for prices higher than their lowest selling price. Market maker in the middle can take some amount of profit. It is a win‐win‐win situation for all parties involved. V. Product Design Problem Question: How can you improve the throughput to 120? ...
View Full Document

This document was uploaded on 02/01/2012.

Ask a homework question - tutors are online