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How much is a Dollar Worth? Tipping versus Equilibrium Coexistence on Competing Online Auction Sites

  • Brown, Jennifer
  • Morgan, John

The equilibrium model of Ellison, Fudenberg, and Möbius (2004) predicts that, if two competing auction sites are coexisting, then seller revenues and buyer-seller ratios on each site should be approximately equal. We examine these hypotheses using field experiments selling identical items on the eBay and Yahoo auction sites. We find evidence that is inconsistent with the equilibrium hypotheses, and suggest that the eBay-Yahoo market is in the process of tipping. Robust statistical tests indicate that revenues on eBay are consistently 20 to 70 percent higher than those on Yahoo. In addition, eBay auctions attract approximately two additional buyers per seller than equivalent Yahoo auctions. We also vary the Yahoo ending rule from a hard close to soft close but find no statistically or economically significant changes in revenue or numbers of bidders. Moreover, the magnitude of the revenue and buyer-seller ratio disparities remain inconsistent with the notion of equilibrium coexistence even after accounting for various differentiators between the sites.

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Paper provided by Competition Policy Center, Institute for Business and Economic Research, UC Berkeley in its series Competition Policy Center, Working Paper Series with number qt3c21w91h.

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Date of creation: 01 Oct 2006
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Handle: RePEc:cdl:compol:qt3c21w91h
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  1. David Lucking-Reiley & John List, 2002. "Bidding behavior and decision costs in field experiments," Framed Field Experiments 00181, The Field Experiments Website.
  2. van Raalte, Chris & Webers, Harry, 1998. "Spatial competition with intermediated matching," Journal of Economic Behavior & Organization, Elsevier, vol. 34(3), pages 477-488, March.
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  4. Dan Ariely & Axel Ockenfels & Alvin E. Roth, 2002. "An Experimental Analysis of Ending Rules in Internet Auctions," Papers on Strategic Interaction 2002-47, Max Planck Institute of Economics, Strategic Interaction Group.
  5. 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.
  6. Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
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  8. David Lucking-Reiley, 1999. "Using Field Experiments to Test Equivalence between Auction Formats: Magic on the Internet," American Economic Review, American Economic Association, vol. 89(5), pages 1063-1080, December.
  9. David Lucking-Reiley & John List, 2000. "Demand reduction in a multi-unit auction: Evidence from a sportscard field experiment," Framed Field Experiments 00180, The Field Experiments Website.
  10. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
  11. Axel Ockenfels & Alvin E. Roth, 2003. "Late and Multiple Bidding in Second Price Internet Auctions: Theory and Evidence Concerning Different Rules for Ending an Auction," CESifo Working Paper Series 992, CESifo Group Munich.
  12. Glenn Harrison & John List, 2004. "Field experiments," Artefactual Field Experiments 00058, The Field Experiments Website.
  13. Hossain Tanjim & Morgan John, 2006. "...Plus Shipping and Handling: Revenue (Non) Equivalence in Field Experiments on eBay," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(2), pages 1-30, January.
  14. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
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  16. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
  17. Gehrig, Thomas, 1998. "Competing markets," European Economic Review, Elsevier, vol. 42(2), pages 277-310, February.
  18. repec:feb:framed:0052 is not listed on IDEAS
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