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Comparing revenue from auctions and posted prices

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  • Hammond, Robert G.

Abstract

I analyze the market for compact discs using an original data set of items listed for sale online. Over 5000 listings of both new and used compact discs were collected from eBay (which provides sellers a choice between two mechanisms: auction or posted price) and its subsidiary, Half.com (which features only posted prices). Despite the often cited revenue-dominance property of auctions, many sellers choose to post a fixed price. To explain this anomaly, I examine empirically the determinants of the revenue earned by sellers in this market. I find that posted-price goods sell for higher prices, while auctioned goods sell with a higher probability. Further results suggest that the size of a seller's inventory is the key factor in the choice between selling in an auction and posting a fixed price. In particular, sellers with large inventories are more likely to use the posted-price mechanism.

Suggested Citation

  • Hammond, Robert G., 2010. "Comparing revenue from auctions and posted prices," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 1-9, January.
  • Handle: RePEc:eee:indorg:v:28:y:2010:i:1:p:1-9
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Christopher Boyer & B. Brorsen & Tong Zhang, 2014. "Common-value auction versus posted-price selling: an agent-based model approach," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 9(1), pages 129-149, April.
    2. Wang, Hong, 2017. "Analysis and design for multi-unit online auctions," European Journal of Operational Research, Elsevier, vol. 258(3), pages 1191-1203.
    3. Liu, Kang Ernest & Shiu, Ji-Liang & Sun, Chia-Hung, 2013. "How different are consumers in Internet auction markets? Evidence from Japan and Taiwan," Japan and the World Economy, Elsevier, vol. 28(C), pages 1-12.
    4. Hummel, Patrick, 2015. "Simultaneous use of auctions and posted prices," European Economic Review, Elsevier, vol. 78(C), pages 269-284.
    5. Chen, Kong-Pin & Liu, Yu-Sheng & Yu, Ya-Ting, 2012. "The Seller's listing strategy in online auctions: evidence from eBay," MPRA Paper 38369, University Library of Munich, Germany.
    6. Eberhard Feess & Christian Grund & Markus Walzl & Ansgar Wohlschlegel, 2014. "Competing Trade Mechanisms and Monotone Mechanism Choice," Working Papers 2014-28, Faculty of Economics and Statistics, University of Innsbruck.
    7. Bauner, Christoph, 2015. "Mechanism choice and the buy-it-now auction: A structural model of competing buyers and sellers," International Journal of Industrial Organization, Elsevier, vol. 38(C), pages 19-31.
    8. Shiu, Ji-Liang & Sun, Chia-Hung D., 2014. "Modeling and estimating returns to seller reputation with unobserved heterogeneity in online auctions," Economic Modelling, Elsevier, vol. 40(C), pages 59-67.
    9. Francesco Angelini & Massimiliano Castellani, 2017. "Understanding the artwork pricing: some theoretical models," Working Paper series 17-25, Rimini Centre for Economic Analysis, revised Mar 2018.
    10. repec:eee:indorg:v:56:y:2018:i:c:p:107-144 is not listed on IDEAS
    11. Hammond, Robert G., 2013. "A structural model of competing sellers: Auctions and posted prices," European Economic Review, Elsevier, vol. 60(C), pages 52-68.
    12. 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.

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