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How Much Is a Dollar Worth? Tipping versus Equilibrium Coexistence on Competing Online Auction Sites

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  • Jennifer Brown
  • John Morgan

Abstract

Theory models of platform competition predict that prices and buyer-seller ratios should be approximately equal on coexisting auction sites. Using field experiments on eBay and Yahoo Auctions, we find evidence that is inconsistent with equilibrium hypotheses and suggest that the market is tipping. Prices on eBay are consistently 20-70 percent higher than those on Yahoo, and eBay attracts two additional buyers per seller. On Yahoo, prices and bidders counts are unaffected by the auction ending rule. Various differences between the sites cannot account for the magnitude of these disparities. However, a model of imitation dynamics can rationalize our findings. (c) 2009 by The University of Chicago. All rights reserved.

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  • Jennifer Brown & John Morgan, 2009. "How Much Is a Dollar Worth? Tipping versus Equilibrium Coexistence on Competing Online Auction Sites," Journal of Political Economy, University of Chicago Press, vol. 117(4), pages 668-700, August.
    • Handle: RePEc:ucp:jpolec:v:117:y:2009:i:4:p:668-700
    DOI: 10.1086/605358
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    Cited by:

    1. Alexander Matros & Andriy Zapechelnyuk, 2010. "Competition of E-Commerce Intermediaries," Working Papers 675, Queen Mary University of London, School of Economics and Finance.
    2. Laurent Lamy, 2013. "“Upping the ante”: how to design efficient auctions with entry?," RAND Journal of Economics, RAND Corporation, vol. 44(2), pages 194-214, June.
    3. Omar Al-Ubaydli & John A. List, 2016. "Field Experiments in Markets," NBER Working Papers 22113, National Bureau of Economic Research, Inc.
    4. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2011. "Field Experiments with Firms," Journal of Economic Perspectives, American Economic Association, vol. 25(3), pages 63-82, Summer.
    5. Laurent Lamy, 2010. ""Upping the ante": How to design efficient auctions with entry?," Working Papers halshs-00564888, HAL.
    6. Han, Jidong & Popkowski Leszczyc, Peter T.L. & Zhang, Zelin, 2021. "Empirical Analyses of Nonlinear Effects of Reserve Prices on Ending Prices in Online Auctions," Journal of Interactive Marketing, Elsevier, vol. 54(C), pages 86-102.
    7. Syngjoo Choi & Lars Nesheim & Imran Rasul, 2010. "Reserve price effects in auctions: estimates from multiple RD designs," CeMMAP working papers CWP30/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    8. Glover, Brent & Raviv, Yaron, 2012. "Revenue non-equivalence between auctions with soft and hard closing mechanisms: New evidence from Yahoo!," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 129-136.
    9. Sander Onderstal, 2020. "Premium auctions in the field," Review of Economic Design, Springer;Society for Economic Design, vol. 24(1), pages 39-63, June.
    10. Liran Einav & Chiara Farronato & Jonathan Levin, 2016. "Peer-to-Peer Markets," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 615-635, October.
    11. 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.
    12. Sascha Füllbrunn & Abdolkarim Sadrieh, 2012. "Sudden Termination Auctions—An Experimental Study," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(2), pages 519-540, June.
    13. Janne Tukiainen, 2017. "Effects of Minimum Bid Increments in Internet Auctions: Evidence from a Field Experiment," Journal of Industrial Economics, Wiley Blackwell, vol. 65(3), pages 597-622, September.
    14. Yan Chen & Peter Cramton & John List & Axel Ockenfels, 2020. "Market Design, Human Behavior and Management," Artefactual Field Experiments 00685, The Field Experiments Website.
    15. Ostrovsky, Michael & Schwarz, Michael, 2009. "Reserve Prices in Internet Advertising Auctions: A Field Experiment," Research Papers 2054, Stanford University, Graduate School of Business.
    16. Yang, Wei & Xiao, Baichun & Wu, Lifang, 2020. "Learning and pricing models for repeated generalized second-price auction in search advertising," European Journal of Operational Research, Elsevier, vol. 282(2), pages 696-711.
    17. Syngjoo Choi & Lars Nesheim & Imran Rasul, 2016. "Reserve Price Effects In Auctions: Estimates From Multiple Regression-Discontinuity Designs," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 294-314, January.
    18. Jonathan Levin, 2011. "The Economics of Internet Markets," Discussion Papers 10-018, Stanford Institute for Economic Policy Research.
    19. Wen Cao & Qinyang Sha & Zhiyong Yao & Dingwei Gu & Xiang Shao, 2019. "Sniping in soft-close online auctions: empirical evidence from overstock," Marketing Letters, Springer, vol. 30(2), pages 179-191, June.
    20. Ian Ayres & Mahzarin Banaji & Christine Jolls, 2015. "Race effects on eBay," RAND Journal of Economics, RAND Corporation, vol. 46(4), pages 891-917, October.
    21. Alok Gupta & Stephen Parente & Pallab Sanyal, 2012. "Competitive bidding for health insurance contracts: lessons from the online HMO auctions," International Journal of Health Economics and Management, Springer, vol. 12(4), pages 303-322, December.
    22. Shuchi Chawla & Jason D. Hartline & Denis Nekipelov, 2016. "A/B Testing of Auctions," Papers 1606.00908, arXiv.org.
    23. Tanjim Hossain & Dylan Minor & John Morgan, 2011. "Competing Matchmakers: An Experimental Analysis," Management Science, INFORMS, vol. 57(11), pages 1913-1925, November.

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