Seller strategies on eBay: Does size matter?

Anderson, Steven and Friedman, Daniel and Milam, Garrett and Singh, Nirvikar (2007): Seller strategies on eBay: Does size matter?

Abstract

We examine seller strategies in 1177 Internet auctions on eBay, to understand the diversity of strategies used, and their impacts. Dimensions of strategic choice include the use of a ‘Buy it Now’ option, the level of the starting price, and the use of a secret reserve price. A major focus of our analysis is on differences across sellers with different volumes of sales. The largest volume sellers (termed “retailers”) in our sample employ uniform selling strategies, but lower volume sellers exhibit a wide variety of strategic choices. While some components of sellers’ strategies appear important in raising seller revenue, including starting the auction with a ‘Buy it Now’ offer, the overall impact of seller strategy choices on the outcome appears to be quite small. We interpret this as evidence for the competitiveness of the online auction market for frequently traded items with conventional retail alternatives. An exception is provided by the use of a secret reserve price, which raises the winning bid conditional on a sale, but reduces the probability of a sale. Depending on sellers’ risk aversion and impatience, this may also be an efficient outcome.

• Item Type: MPRA Paper
• Institution: University of California, Santa Cruz
• Language: English
• Keywords: Internet auctions; posted prices; market institutions
• Subjects: M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M0 - General; L - Industrial Organization > L8 - Industry Studies: Services > L81 - Retail and Wholesale Trade ; e-Commerce; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L8 - Industry Studies: Services > L86 - Information and Internet Services ; Computer Software