Platform Information Provision: Evidence from an Online Auction Platform

Digital platforms have reduced search costs, fostering niche product markets. However, these markets often suffer from limited and asymmetric information due to a lack of consumer feedback, risking market failure. This paper examines Catawiki's solution, where over 240 experts provide value estimates for rare collectibles being auctioned on a digital platform. Using data from 57,000 listings, we analyze the impact of these estimates on final prices and seller behavior. By leveraging both minimum and maximum expert estimates, we isolate the effect of increasing the maximum estimate while holding the minimum estimate fixed. Our findings indicate that higher expert estimates increase final bidden prices, suggesting buyer trust. Sellers also adjust their behavior by setting fewer reserve prices for items with high estimates, leading to more bids. Despite potential conflicts of interest stemming from the platform's dual role as matchmaker and advisor, our results show that expert estimates are influential even when potentially overinflated. This study underscores the critical role of platform-provided information in enhancing market efficiency.