Online auctions – A flawless business model

Online auctions are not very complicated. At first, people thought that the penny auctions website are imitating the old English mode of auctioning stuff. But the whole sentiment was partially true. The business model was based on the same old conventional brick and mortar auctions, but there was no imitation. In fact, the whole idea was improvised and used as a perfect market for both sellers and buyers.

The concept of a perfect market is a myth, and until auction sites came on to the internet, there was no possibility of developing such a market. Perfect market has certain clauses:

• Free entry of buyers and sellers

This feature is shown by the auction sites. Since there are no boundaries for entering and exiting the online market, the buyers and sellers can enter and leave the market whenever they want and there are no parameters that affect any of their decisions.

• Free and non-influential competition

The competition that a perfect market holds is identical to that of an auction site. There are equal chances of the customers choosing one seller over another. The decision of the buyer is not influenced by any of the sellers and the decision is unbiased and impartial.

• All products act as substitutes

For every product that is listed, there are substitutes, considering the absence of brands. The nature of the product still is the same and that is what makes the products substitutes of one another and every customer has equal chances of buying any product that they want.

Auction websites are the based on a flawless business model and that makes them so popular since the customer has been empowered by the choices and the reviews of the products and the decision that is made becomes productively impartial.