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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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Bibliographic Info

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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References

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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. Nicola Lacetera & Bradley J. Larsen & Devin G. Pope & Justin R. Sydnor, 2013. "Bid Takers or Market Makers? The Effect of Auctioneers on Auction Outcomes," NBER Working Papers 19731, National Bureau of Economic Research, Inc.
  2. Liran Einav & Chiara Farronato & Jonathan D. Levin & Neel Sundaresan, 2013. "Sales Mechanisms in Online Markets: What Happened to Internet Auctions?," NBER Working Papers 19021, National Bureau of Economic Research, Inc.
  3. Liran Einav & Jonathan Levin, 2013. "The Data Revolution and Economic Analysis," NBER Chapters, in: Innovation Policy and the Economy, Volume 14, pages 1-24 National Bureau of Economic Research, Inc.
  4. Benjamin Edelman, 2012. "Using Internet Data for Economic Research," Journal of Economic Perspectives, American Economic Association, vol. 26(2), pages 189-206, Spring.
  5. Jonathan Levin, 2011. "The Economics of Internet Markets," Discussion Papers 10-018, Stanford Institute for Economic Policy Research.
  6. Liran Einav & Dan Knoepfle & Jonathan Levin & Neel Sundaresan, 2014. "Sales Taxes and Internet Commerce," American Economic Review, American Economic Association, vol. 104(1), pages 1-26, January.
  7. Wang, Zhongmin & Xu, Minbo, 2013. "Selling a Dollar for More Than a Dollar? Evidence from Online Penny Auctions," Discussion Papers dp-13-15, Resources For the Future.

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