Analyzing StockX’s Auction Process
StockX is one of the safest apps to buy, discover, and sell authentic sneakers. As a sneakerhead, I always use StockX not only to buy the sneakers I could not purchase in an online raffle system but also to discover the new price of the brand-new sneakers that are released this season. To do so, I, the buyer, look at the price suggested by the seller, the person who owns the shoes, and decide whether the price meets my economic criteria. We can use the concept we learned in class to analyze what type of auction is for StockX. Is StockX’s first price auction? Or a second-price auction? Is it an ascending bid or a descending bid?
StockX, like other auction systems, uses the notion of bidding. Indeed, the users can buy the sneakers by purchasing the product at its lowest ask, the lowest price the StockX seller is willing to sell for. However, certain sellers put their sneakers on the market asking for an insane amount of cash, which is where we buyers use bidding. Let us suppose that the brand new Nike sneaker is at the lowest ask of $100, and the current highest bid by the other buyer(or player) is $80. According to the article, if I wish to buy the sneaker at a lower price, I should bid around $90, or any higher than the current highest bid, because the sellers will not accept me if my suggested price is lower than theirs. If the seller does not want to sell at my price, they can still lower the asked price for a compromise. After multiple back-and-forth changes of deals, the seller and I will arrive at a price, where I pay the suggested price to the seller. From here, we know that the auction system of StockX is the first price system, where the person who bids the highest obtains the sneaker. Thus, the dominant strategy in StockX is to place a bid lower than one’s true value. If not, the buyer is either buying the product at a true value, not earning any profit, or they will lose gain from paying one’s price above their true value.
Now, is it an ascending or descending bid? It is a slightly different situation for StockX. While other auctions have the ascending first price auction for players to outbid each other until the highest bidder comes out, StockX already provides the lowest ask. For instance, there is a rare sneaker on StockX at a price of $1000. In this case, people do not bid to compete until the highest amount. Why bid the amount of $1100 if the lowest ask is already at $1000? So though it has the concept of ascending bid, it is only for players who are willing to buy the sneakers at a lower price than what they’re asked for. However, the usual case is that once the rare sneaker is purchased, the other sellers of the same sneaker will raise their lowest ask because they realize the rising demand for their own sneakers.
Due to its popularity, StockX has been one of the most popular resell markets around the world. The article I read provides a simple guide to using StockX efficiently by placing bids at an adequate amount. The secret behind this strategy is a dominant strategy from the first price auction we learned in class.
Sources: https://techcrunch.com/2021/04/05/stockx-ec1-origin/
https://stockx.com/news/bidding-on-stockx/
September 27, 2022 | category: Uncategorized
