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Learning from Seller Experiments in Online Markets

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  • Liran Einav
  • Theresa Kuchler
  • Jonathan D. Levin
  • Neel Sundaresan

Abstract

The internet has dramatically reduced the cost of varying prices, displays and information provided to consumers, facilitating both active and passive experimentation. We document the prevalence of targeted pricing and auction design variation on eBay, and identify hundreds of thousands of experiments conducted by sellers across a wide array of retail products. We show how this type of data can be used to address questions about consumer behavior and market outcomes, and provide illustrative results on price dispersion, the frequency of over-bidding, the choice of reserve prices, "buy now" options and other auction design parameters, and on consumer sensitivity to shipping fees. We argue that leveraging the experiments of market participants takes advantage of the scale and heterogeneity of online markets and can be a powerful approach for testing and measurement.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17385.

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Date of creation: Sep 2011
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Handle: RePEc:nbr:nberwo:17385

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  1. Patrick Bajari & Ali Horta�su, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June.
  2. Jennifer Brown & Tanjim Hossain & John Morgan, 2010. "Shrouded Attributes and Information Suppression: Evidence from the Field," The Quarterly Journal of Economics, MIT Press, vol. 125(2), pages 859-876, May.
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Cited by:
  1. Liran Einav & Dan Knoepfle & Jonathan D. Levin & Neel Sundaresan, 2012. "Sales Taxes and Internet Commerce," NBER Working Papers 18018, National Bureau of Economic Research, Inc.
  2. Jonathan D. Levin, 2011. "The Economics of Internet Markets," NBER Working Papers 16852, National Bureau of Economic Research, Inc.

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