Detecting shill bidding in online English auctions

Abstract

Shill bidding is where spurious bids are introduced into an auction to drive up the final price for the seller, thereby defrauding legitimate bidders. While shilling is recognized as a problem, presently there is little or no established means of defense against shills. This chapter presents an algorithm to detect the presence of shill bidding in online auctions. It observes bidding patterns over a series of auctions, providing each bidder a score indicating the likelihood of his/her potential involvement in shill behavior. The algorithm has been tested on data obtained from a series of realistic simulated auctions, and commercial online auctions. The algorithm is able to prune the search space required to detect which bidders are likely to be shills. This has significant practical and legal implications for commercial online auctions where shilling is considered a major threat. This chapter presents a framework for a feasible solution, which acts as a detection mechanism and a deterrent.