On eBay, the bidder who places the highest bid wins the auction and pays only what the second highest bidder offered. Researchers Wolfgang Jank and Galit Shmueli reported that purchasers on eBay in 2003 paid $7 billion less than their winning bids. Because each bid shows the buyer’s willingness to pay, the winner receives an estimated consumer surplus of $4 or more.

What method is used to allocate goods on eBay? How does an eBay auction influence consumer surplus from the good?