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

  • Jennifer Brown
  • John Morgan

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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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 117 (2009)
Issue (Month): 4 (08)
Pages: 668-700

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Handle: RePEc:ucp:jpolec:v:117:y:2009:i:4:p:668-700
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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  14. Glenn Ellison & Drew Fudenberg, 2003. "Knife-Edge Or Plateau: When Do Market Models Tip?," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1249-1278, November.
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