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Ebay Economics: Factors That Determine Online Auction Prices

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  • Schamel, Guenter
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    Abstract

    We analyze online auction prices for top range Bordeaux wine sold on the German eBay site, evaluating the impact of eBay specifics such as auction length, timing of the auction end (day of week, time of day), number of bids, buyer interest (page count), seller reputation, initial prices, picture effects, or private auctions (bidder identity remains undisclosed). Moreover, we evaluate the impact of Parker's rating and whether this quality information is revealed. Other variables of interest are wine age, brands, regional origin, and the 1855 classification. We estimate a main model and two subsets (with page counter, initial bid equal 1€). Our hedonic estimation of the full sample reveals that relative to Sundays, wine auctions ending on Fridays resulted in significantly higher prices (about 9%). Thus, we cannot confirm a weekend effect. Time of day effects are insignificant relative to the base period (21h-22h CET), except when auctions end in the morning (8h-12h CET) or late evening (22h-23 CET) and prices are 11% lower. We observe a small auction length effect (+2%). Seller reputation showed no significant impact on the final auction price except when the initial bid is 1€. The number of bids showed a significant but small impact on final prices (+1.7%). The private auction effect (hidden bidder identity) is also significant at 5%. Moreover, Parker points carry an elasticity of 3.6 and disclosing them in the auction (information disclosure effect) results in a premium of 12%. Château (brand) effects are highly significant ranging up to 150% (Châteaux Pétrus and Margaux). Appellation premiums may exceed 90% (Pomerol). 1855 classifications are significant and in correct order except for Quatrièmes Crus.

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    Bibliographic Info

    Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2004 Annual meeting, August 1-4, Denver, CO with number 20407.

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    Date of creation: 2004
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    Handle: RePEc:ags:aaea04:20407

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    Keywords: Research and Development/Tech Change/Emerging Technologies;

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    1. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September.
    2. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Economics Series Working Papers 1999-W12, University of Oxford, Department of Economics.
    3. Daniel Houser & John Wooders, 2006. "Reputation in Auctions: Theory, and Evidence from eBay," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 353-369, 06.
    4. Lucking-Reiley, David, 2000. "Auctions on the Internet: What's Being Auctioned, and How?," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 227-52, September.
    5. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    6. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
    7. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November.
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