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The Winner's Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from eBay Auctions

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  • Bajari, Patrick
  • Hortacsu, Ali

Abstract

Internet auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce. We examine a unique dataset of eBay coin auctions to explore the determinants of bidder and seller behavior. We first document a number of empirical regularities. We then specify and estimate a structural econometric model of bidding on eBay. Using our parameter estimates from this model, we measure the extent of the winner's curse and simulate seller revenue under different reserve prices. Copyright 2003 by the RAND Corporation.

Suggested Citation

  • Bajari, Patrick & Hortacsu, Ali, 2003. " The Winner's Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from eBay Auctions," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 329-355, Summer.
  • Handle: RePEc:rje:randje:v:34:y:2003:i:2:p:329-55
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    References listed on IDEAS

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    1. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, pages 1-37.
    2. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-829, September.
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    5. Armstrong, M., 1996. "Network interconnection," Discussion Paper Series In Economics And Econometrics 9625, Economics Division, School of Social Sciences, University of Southampton.
    6. Doh-Shin Jeon & Jean-Jacques Laffont & Jean Tirole, 2004. "On the Receiver-Pays Principle," RAND Journal of Economics, The RAND Corporation, pages 85-110.
    7. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 14(1), pages 1-25, February.
    8. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: II. Price Discrimination," RAND Journal of Economics, The RAND Corporation, pages 38-56.
    9. Gans, Joshua S. & King, Stephen P., 2001. "Using 'bill and keep' interconnect arrangements to soften network competition," Economics Letters, Elsevier, vol. 71(3), pages 413-420, June.
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