Electronic Commerce 10th Edition by

Schneider ISBN 1133526829

9781133526827
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Chapter 6: Social Networking, Mobile Commerce, and Online Auctions

TRUE/FALSE

1. The Internet reduces transaction costs in value chains and offers an efficient means of communication
to anyone with an Internet connection.

ANS: T PTS: 1 REF: 246

2. Virtual communities began online after the Internet was in general use.

ANS: F PTS: 1 REF: 247

3. Most of the early Web community businesses are open and thriving today.

ANS: F PTS: 1 REF: 247-248

4. The general idea behind all of the social networking sites is that people are invited to join by existing
members who think they would be valuable additions to the community.

ANS: T PTS: 1 REF: 249

5. The 2008 U.S. elections saw the first major use of blogs as a political networking tool.

ANS: F PTS: 1 REF: 250

 6. Social networking sites are used in the political realm to discuss issues, plan strategies, and even
arrange in-person meetings called mashups.

ANS: F PTS: 1 REF: 250

7. One of the first social shopping sites was craigslist, an information resource for San Francisco area
residents that was created in 1995 by WELL member Craig Newmark.

ANS: T PTS: 1 REF: 251

8. Many colleges and universities now offer courses that use distance learning platforms such as
Blackboard for student-instructor interaction.

ANS: T PTS: 1 REF: 251

9. Visitors spend a greater amount of time at portal sites than they do at most other types of Web sites,
which is attractive to advertisers.

ANS: T PTS: 1 REF: 252

10. Sites conducting monetizing campaigns are unconcerned about visitor backlash.

ANS: F PTS: 1 REF: 253

11. A growing number of large organizations have built internal Web sites that provide opportunities for
social interaction among their employees.

ANS: T PTS: 1 REF: 254

12. Dutch auctions move large numbers of commodity items relatively slowly.

ANS: F PTS: 1 REF: 260

13. The Dutch auction is also called an ascending-price auction.

ANS: F PTS: 1 REF: 260

14. In a double auction, buyers and sellers each submit combined price-quantity bids to an auctioneer.

ANS: T PTS: 1 REF: 261

15. In sealed-bid auctions, bidders submit their bids independently and the bidders typically share
information with each other.

ANS: F PTS: 1 REF: 261

16. Analysts believe that a more appropriate term for the electronic commerce that occurs in general
consumer auctions is consumer-to-consumer.

ANS: T PTS: 1 REF: 263

17. The most successful consumer auction Web site today is eBay.

ANS: T PTS: 1 REF: 263

 18. The lock-in effect makes the task of creating successful general consumer Web sites much easier.

ANS: F PTS: 1 REF: 265

19. The types of products that work well for group shopping sites are branded products with well-
established reputations.

ANS: T PTS: 1 REF: 267

20. In industries where there is a high degree of competition among suppliers, reverse auctions can be an
efficient way to conduct and manage the price bidding that would naturally occur in that market.

ANS: T PTS: 1 REF: 269

21. When selling high-value items through an online auction, sellers can use an escrow service to protect
their interests.

ANS: F PTS: 1 REF: 270

22. Sniping software observes auction progress until the last second or two of the auction clock.

ANS: T PTS: 1 REF: 271

23. The first auctioning software, named Cricket Jr., was written by David Eccles in 1997.

ANS: F PTS: 1 REF: 271

24. Because sniping software synchronizes its internal clock to the auction site clock and executes its bid
with a computer’s precision, the software almost always wins out over a human bidder.

ANS: T PTS: 1 REF: 271

25. The act of placing a winning bid at the last second is called a lock-in.

ANS: F PTS: 1 REF: 271

MULTIPLE CHOICE

1. ____ were computers that allowed users to connect through modems (using dial-up connections
through telephone lines) to read and post messages in a common area.
a. Electronic social systems c. IRC systems
b. Bulletin chat systems d. Bulletin board systems
ANS: D PTS: 1 REF: 247

2. A(n) ____ is a gathering place for people and businesses that does not have a physical existence.
a. meetup c. lock-in community
b. online community d. escrow service
ANS: B PTS: 1 REF: 247
 3. A(n) ____ site is a Web site that allows individuals to create and publish a profile, create a list of other
users with whom they share a connection (or connections), control that list, and monitor similar lists
made by other users.
a. social commerce c. social networking
b. electronic commerce d. social medium
ANS: C PTS: 1 REF: 248

4. The trend toward having readers help write the online newspaper is called ____ journalism.
a. participatory c. social
b. peer d. collective
ANS: A PTS: 1 REF: 250

5. The earliest written records of auctions are from Babylon and date from ____ B.C.
a. 100 c. 2000
b. 500 d. 4000
ANS: B PTS: 1 REF: 259

6. The 18th century saw the birth of two British auction houses, ____ in 1744 and Christie's in 1766.
a. William's c. Vickrey's
b. Sotheby's d. Tiffany
ANS: B PTS: 1 REF: 259

7. ____ are the prices that potential buyers in an auction are willing to pay for an item.
a. Bids c. Inquiries
b. Proposals d. Reserves
ANS: A PTS: 1 REF: 259

8. The whole auction process is managed by a(n) ____.

a. shill bidder c. observer
b. auctioneer d. developer
ANS: B PTS: 1 REF: 259

9. In some auctions, ____, employed by the seller or the auctioneer, can make bids on behalf of the seller.
a. auction agents c. shill bidders
b. faux bidders d. auction dealers
ANS: C PTS: 1 REF: 259

10. An English auction is sometimes called a(n) ____ because the bids are publicly announced.
a. reverse auction c. open auction
b. double auction d. semi-open auction
ANS: C PTS: 1 REF: 260

11. The ____ auction is a form of open auction in which bidding starts at a high price and drops until a
bidder accepts the price.
a. English c. French
b. Dutch d. Spanish
ANS: B PTS: 1 REF: 260
12. In ____ auctions, bidders submit their bids independently and are usually prohibited from sharing
information with each other.
a. sealed-bid c. open-outcry
b. closed-bid d. secure-bid
ANS: A PTS: 1 REF: 261

13. In a first-price sealed-bid auction, the ____ bidder wins.

a. highest c. second lowest
b. second highest d. lowest
ANS: A PTS: 1 REF: 261

14. Second-price sealed-bid auctions are commonly called ____ auctions.

a. open outcry c. double
b. Vickrey d. Victory
ANS: B PTS: 1 REF: 261

15. In a(n) ____ auction, buyers and sellers each submit combined price-quantity bids to an auctioneer.
a. sealed-bid c. English
b. Dutch d. double
ANS: D PTS: 1 REF: 261

16. The Chicago Board of Trade conducts ____ auctions of commodity futures and stock options.
a. first-price sealed-bid c. open-outcry double
b. sealed-bid double d. second-price sealed-bid
ANS: C PTS: 1 REF: 261

17. The New York Stock Exchange conducts ____ auctions of stocks and bonds in which the auctioneer,
called a specialist, manages the market for a particular stock or bond issue.
a. sealed-bid double c. open-cry double
b. first-price sealed d. second-price sealed-bid
ANS: A PTS: 1 REF: 261

18. The most common format used on eBay is a computerized version of the ____ auction.
a. Dutch c. English
b. sealed-bid d. Vickrey
ANS: C PTS: 1 REF: 263

19. A ____ is the amount by which one bid must exceed the previous bid.
a. minimum bid increment c. reserve bid
b. deposit bid d. maximum bid increment
ANS: A PTS: 1 REF: 264

20. In an auction, a third-party ____ service can be used to hold the buyer's payment until he or she
receives and is satisfied with the purchased item.
a. insurance c. escrow
b. risk management d. guarantee
ANS: C PTS: 1 REF: 265
 21. Existing auction sites, such as eBay, are inherently more valuable to customers than new auction sites.
This is called a(n) ____.
a. opt-in effect c. lock-out effect
b. lock-in effect d. opt-out effect
ANS: B PTS: 1 REF: 265

22. Many people think of Priceline.com as a ____ auction site.

a. double c. sealed-bid
b. shill bid d. seller-bid
ANS: D PTS: 1 REF: 266

23. Large companies sometimes have ____ who find buyers for unusable inventory items.
a. liquidation specialists c. accountants
b. inventory specialists d. auditors
ANS: A PTS: 1 REF: 268

24. Smaller businesses often sell their unusable and excess inventory to ____, which are firms that find
buyers for these items.
a. inventory specialists c. inventory removal services
b. liquidation brokers d. secondary marketers
ANS: B PTS: 1 REF: 268

25. Companies, called ____ take an item and create an online auction for that item, handle the transaction,
and remit the balance of the proceeds after deducting a fee.
a. auction consignment services c. sniping brokers
b. liquidation brokers d. escrow services
ANS: A PTS: 1 REF: 271

COMPLETION

1. Started at Duke University in 1979, ____________________ was a set of interconnected computers

devoted to storing information on specific topics.

ANS: Usenet

PTS: 1 REF: 247

2. Usenet ____________________ were message posting areas in which interested persons (primarily
from the education and research communities) could discuss various topics.

ANS: newsgroups

PTS: 1 REF: 247

3. In 1999, Geocities was purchased by ____________________ for $5 billion.

ANS:
Yahoo!
Yahoo
 PTS: 1 REF: 247

4. The social networking site ____________________ was based on the idea that no more than six
persons separated anyone in the world from any other person.

ANS: Six Degrees

PTS: 1 REF: 248

5. Web sites that create communities based on the connections between ideas and that are more abstract
are called ____________________ virtual communities.

ANS:
idea-based
idea based

PTS: 1 REF: 251

6. By the late 1990s, virtual communities were selling ____________________ to generate revenue.

ANS: advertising

PTS: 1 REF: 251

7. One rough measure of ____________________ is how long each user spends at a Web site.

ANS: stickiness

PTS: 1 REF: 252

8. ____________________-wave advertising fees are based less on up-front site sponsorship payments
and more on the generation of revenues from continuing relationships with people who use the social
networking sites.

ANS: Second

PTS: 1 REF: 253

9. ____________________ refers to the conversion of existing regular site visitors seeking free
information or services into fee-paying subscribers or purchasers of services.

ANS: Monetizing

PTS: 1 REF: 253

10. Because social networking sites ask their members to provide demographic information about
themselves, the potential for ____________________ marketing on these types of sites is very high.

ANS: targeted

PTS: 1 REF: 253

11. ____________________ allows Web pages formatted in HTML to be displayed on devices with small
screens.
 ANS:
Wireless Application Protocol
WAP (Wireless Application Protocol)
Wireless Application Protocol (WAP)
WAP

PTS: 1 REF: 256

12. A(n) ____________________ site can charge both buyers and sellers to participate, and it can sell
advertising on its pages.

ANS: auction

PTS: 1 REF: 259

13. ____________________ valuations are amounts that bidders are willing to pay for an item.

ANS: Private

PTS: 1 REF: 259

14. In some cases, an English auction has a(n) ____________________ bid, or reserve price.

ANS: minimum

PTS: 1 REF: 260

15. In English auctions, bidders risk becoming caught up in the excitement of competitive bidding and
then bidding more than their private valuations. This phenomenon is called the
____________________.

ANS: winner's curse

PTS: 1 REF: 260

16. A(n) ____________________ auction is often better for the seller because the bidder with the highest
private valuation will not let the bid drop much below that valuation for fear of losing the item to
another bidder.

ANS: Dutch

PTS: 1 REF: 260

17. Dutch auctions are also called ____________________ auctions.

ANS: descending-price

PTS: 1 REF: 260

18. In 2004, Google used a(n) ____________________ auction to sell its stock to investors in its initial
public offering.

ANS: Dutch
 PTS: 1 REF: 261

19. If multiple items are being auctioned in a(n) ____________________ sealed-bid auction, successive
lower (next highest) bidders are awarded the remaining items at the price they bid.

ANS:
first-price
first price

PTS: 1 REF: 261

20. William Vickrey won the 1996 Nobel Prize in Economics for his studies of the properties of
____________________ sealed-bid auctions.

ANS:
second-price
second price

PTS: 1 REF: 261

21. ____________________ auctions, either sealed-bid or open-outcry, work well only for items of
known quality, such as securities or graded agricultural products, that are regularly traded in large
quantities.

ANS: Double

PTS: 1 REF: 261

22. In a(n) ____________________ auction, multiple sellers submit price bids to an auctioneer who
represents a single buyer.

ANS:
reverse
seller-bid

PTS: 1 REF: 262

23. In an eBay ____________________, the bidder specifies a maximum bid and as new bidders enter the
auction, the eBay site software continually enters higher bids for all bidders who placed such bids.

ANS: proxy bid

PTS: 1 REF: 264

24. The site JustBeads.com is an example of a(n) ____________________ auction site that caters to
buyers and sellers who are geographically dispersed but share highly focused interests.

ANS:
specialized Web
specialty consumer

PTS: 1 REF: 266

 25. The act of placing a winning bid at the last second is called a(n) ____________________.

ANS: snipe

PTS: 1 REF: 271

ESSAY

1. Describe the operation of a typical auction.

ANS:
In an auction, a seller offers an item or items for sale, but does not establish a price. This is called
"putting an item up for bid" or "putting an item on the (auction) block." Potential buyers are given
information about the item or some opportunity to examine it; they then offer bids, which are the
prices they are willing to pay for the item. The potential buyers, or bidders, each have developed
private valuations, or amounts they are willing to pay for the item. The whole auction process is
managed by an auctioneer.

PTS: 1 REF: 259

2. What is the difference between an English auction and a Dutch auction?

ANS:
In an English auction, bidders publicly announce their successive higher bids until no higher bid is
forthcoming. At that point, the auctioneer pronounces the item sold to the highest bidder at that
bidder's price. The Dutch auction is a form of open auction in which bidding starts at a high price and
drops until a bidder accepts the price.

PTS: 1 REF: 259-260

3. What is the main difference between eBay and a live English auction?

ANS:
The main difference between eBay and a live English auction is that on Ebay, bidders do not know
who placed which bid until the auction is over. The eBay English auction also allows sellers to specify
that an auction be made private. In an eBay private auction, the site never discloses bidders identities
and the prices they bid. At the conclusion of the auction, eBay notifies only the seller and the highest
bidder.

PTS: 1 REF: 263

4. How does proxy bidding work on eBay?

ANS:
In proxy bidding, the bidder specifies a maximum bid. If that maximum bid exceeds the current bid,
the eBay site automatically enters a bid that is one minimum bid increment higher than the current bid.
As new bidders enter the auction, the eBay site software continually enters higher bids for all bidders
who placed proxy bids.

PTS: 1 REF: 264

5. List the supply chain characteristics that support reverse auctions.

ANS:
Supply chain characteristics that support reverse auctions are:
Suppliers are highly competitive
Product features can be clearly specified
Suppliers are willing to reduce the margin they earn on this product
Suppliers are willing to participate in reverse auctions

PTS: 1 REF: 269