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Trading across Borders in Online Auctions

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  • Elena Krasnokutskaya
  • Christian Terwiesch
  • Lucia Tiererova

Abstract

We invoke the insights from the auction literature to study trade in services using data from an online market for programming support. We find that the observed clustering of trade between countries can be rationalized through a model featuring endogenous sorting of sellers who are heterogeneous in both quality and costs across projects offered by buyers who differ in outside option and willingness to pay for quality. To accommodate the possibility of such an outcome we extend a single-auction entry model to a setting where sellers choose among multiple projects. This feature plays an important role in explaining the data and understanding the effects of various trade policies.

Suggested Citation

  • Elena Krasnokutskaya & Christian Terwiesch & Lucia Tiererova, 2018. "Trading across Borders in Online Auctions," American Economic Journal: Microeconomics, American Economic Association, vol. 10(4), pages 27-66, November.
    • Handle: RePEc:aea:aejmic:v:10:y:2018:i:4:p:27-66
    Note: DOI: 10.1257/mic.20160309
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    References listed on IDEAS

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    1. Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2000. "Optimal Nonparametric Estimation of First-Price Auctions," Econometrica, Econometric Society, vol. 68(3), pages 525-574, May.
    2. Elena Krasnokutskaya & Katja Seim, 2011. "Bid Preference Programs and Participation in Highway Procurement Auctions," American Economic Review, American Economic Association, vol. 101(6), pages 2653-2686, October.
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    Cited by:

    1. Matthew Backus & Gregory Lewis, 2016. "Dynamic Demand Estimation in Auction Markets," NBER Working Papers 22375, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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