Electronic Commerce, 7th Edition

Solutions 6-1

Electronic Commerce, 7th Edition 14188-37032 Chapter 6 Solutions
Review Questions
1. In approximately 100 words, define the term “reserve price” and explain how the use of a reserve price can affect the progress and outcome of an auction. Answer: A reserve price is a minimum; even though the bid may start at a very low price, there will be no winner unless the bids reach a reserve price set by the seller. If the reserve is set too high, no one may win the auction. 2. Identify an industry (or a product within an industry) in which buyers would find reverse auctions to be a useful procurement tool. In about 300 words, explain why your chosen industry or product would be a good candidate for a reverse auction procurement process. Answer: One industry that may be considered is the construction industry where bidders are invited to offer value engineering, innovations, and alternate design ideas that could save money over the life cycle of a project. 3. In about 300 words, describe the services offered by an online auction escrow service. Name one advantage and one disadvantage of using this type of an escrow service. Answer: An escrow service will hold the buyer’s funds until the buyer has received the merchandise and is satisfied; this is primarily used for high ticket items. The advantage to the buyer is that they can be sure they are getting what they paid for in the auction. The disadvantage is that a buyer can be dissatisfied about almost anything and the seller must wait for a decision. 4. Some eBay users believe that the use of sniping software is unfair and that eBay should prohibit its use. In an essay of about 200 words, present facts and logical arguments that would convince eBay to prohibit the use of sniping software. Answer: Responses will vary but you should consider the advantages of sniping on