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Competition, endogeneity and the winning bid: An empirical analysis of eBay auctions

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  • Onur, Ilke
  • Velamuri, Malathi

Abstract

Using a dataset of Texas Instruments (TI) calculator auctions on eBay, we estimate the impact of the number of bidders on the winning bid. We highlight the possible endogeneity associated with using the number of observed bidders. We tackle this problem by employing approaches involving instrumental variables. We introduce a novel instrumental variable, the closing interval between successive auctions. Estimates from the two-stage least squares (2SLS) regression are over three times those from an ordinary least squares (OLS) regression.

Suggested Citation

  • Onur, Ilke & Velamuri, Malathi, 2014. "Competition, endogeneity and the winning bid: An empirical analysis of eBay auctions," Information Economics and Policy, Elsevier, vol. 26(C), pages 68-74.
    • Handle: RePEc:eee:iepoli:v:26:y:2014:i:c:p:68-74
    DOI: 10.1016/j.infoecopol.2013.11.003
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    1. David H. Reiley, 2005. "Experimental Evidence on the Endogenous Entry of Bidders in Internet Auctions," Springer Books, in: Amnon Rapoport & Rami Zwick (ed.), Experimental Business Research, chapter 0, pages 103-121, Springer.
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    12. Dellarocas, Chrysanthos, 2003. "The Digitization of Word-of-mouth: Promise and Challenges of Online Feedback Mechanisms," Working papers 4296-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
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    Cited by:

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    More about this item

    Keywords

    Online auctions; eBay; Endogeneity;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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