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.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
4324.
Find related papers by JEL classification: M0 - Business Administration and Business Economics; Marketing; Accounting - - General L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
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