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How eBay Sellers set “Buy-it-now†prices - Bringing The Field Into the Lab

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  • Grebe, Tim
  • Ivanova-Stenzel, Radosveta
  • Kröger, Sabine

Abstract

In this paper we introduce a new type of experiment that combines the advantages of lab and field experiments. The experiment is conducted in the lab but using an unchanged market environment from the real world. Moreover, a subset of the standard subject pool is used, containing those subjects who have experience in conducting transactions in that market environment. This guarantees the test of the theoretical predictions in a highly controlled environment and at the same time enables not to miss the specific features of economic behavior exhibited in the field. We apply the proposed type of experiment to study seller behavior in online auctions with a Buy-It-Now feature, where early potential bidders have the opportunity to accept a posted price offer from the seller before the start of the auction. Bringing the field into the lab, we invited eBay buyers and sellers into the lab to participate in a series of auctions on the eBay platform. We investigate how traders' experience in a real market environment influences their behavior in the lab and whether abstract lab experiments bias subjects' behavior.

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Bibliographic Info

Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 181.

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Date of creation: Nov 2006
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Handle: RePEc:trf:wpaper:181

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Keywords: online auctions; experiments; buyout prices;

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References

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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, American Economic Association, vol. 92(4), pages 1093-1103, September.
  2. Durham Yvonne & Roelofs Matthew R & Standifird Stephen S, 2004. "eBay's Buy-It-Now Function: Who, When, and How," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 4(1), pages 1-24, October.
  3. Dan Ariely & Axel Ockenfels & Alvin E Roth, 2003. "An Experimental Analysis of Ending Rules in Internet Auctions," Levine's Bibliography 506439000000000433, UCLA Department of Economics.
  4. Timothy Mathews, 2003. "A Risk Averse Seller in a Continuous Time Auction with a Buyout Option," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, Department of Economics, Universidade Federal de Pernambuco, vol. 5(2), January.
  5. Gary Charness & Dan Levin, 2005. "When Optimal Choices Feel Wrong: A Laboratory Study of Bayesian Updating, Complexity, and Affect," American Economic Review, American Economic Association, American Economic Association, vol. 95(4), pages 1300-1309, September.
  6. Ockenfels, Axel & Roth, Alvin E., 2006. "Late and multiple bidding in second price Internet auctions: Theory and evidence concerning different rules for ending an auction," Games and Economic Behavior, Elsevier, Elsevier, vol. 55(2), pages 297-320, May.
  7. Timothy Mathews & Brett Katzman, 2006. "The role of varying risk attitudes in an auction with a buyout option," Economic Theory, Springer, Springer, vol. 27(3), pages 597-613, 04.
  8. Timothy Mathews, 2004. "The Impact of Discounting on an Auction with a Buyout Option: a Theoretical Analysis Motivated by eBay’s Buy-It-Now Feature," Journal of Economics, Springer, Springer, vol. 81(1), pages 25-52, 01.
  9. Timothy Mathews, 2006. "Bidder Welfare In An Auction With A Buyout Option," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., World Scientific Publishing Co. Pte. Ltd., vol. 8(04), pages 595-612.
  10. Ivanova-Stenzel, Radosveta & Kröger, Sabine, 2008. "Price formation in a sequential selling mechanism," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 67(3-4), pages 832-843, September.
  11. Kagel, John H & Harstad, Ronald M & Levin, Dan, 1987. "Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study," Econometrica, Econometric Society, Econometric Society, vol. 55(6), pages 1275-1304, November.
  12. Steven Anderson & Daniel Friedman & Garrett Milam & Nirvikar Singh, 2004. "Buy it Now: A Hybrid Internet Market Institution," Industrial Organization, EconWPA 0412003, EconWPA.
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Cited by:
  1. Nicholas Shunda, 2007. "Auctions with a Buy Price: The Case of Reference-Dependent Preferences," Working papers, University of Connecticut, Department of Economics 2007-42, University of Connecticut, Department of Economics.
  2. Peeters, Ronald & Strobel, Martin & Vermeulen, Dries & Walzl, Markus, 2007. "The impact of the irrelevant – Temporary buy-options and bidding behavior in online auctions," Research Memorandum 027, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).

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