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Optimal Design of Two-Sided Market Platforms: An Empirical Case Study of eBay

Author

Listed:
  • Aaron Bodoh-Creed

    () (University of California at Berkeley)

  • Jörn Boehnke

    () (University of Chicago)

  • Brent R. Hickman

    () (University of Chicago)

Abstract

While much is known about optimal design of auctions within the context of a single item for sale, little is known about optimal design of large platform markets like eBay and auto auction houses that house large numbers of concurrent auctions. We attempt a macro-level empirical market design exercise by combining a unique dataset on tablet sales collected from eBay over the course of a year with methodologies developed by Bodoh-Creed (2011) and Backus and Lewis (2013). The former proposes a tractable approach to studying dynamic auction markets when the number of participants on both sides is sufficiently large. The model also delivers predictions on optimal fee schedule design -- specifically, in terms of listing fees and percentage charges for a sale -- for an auction house wishing to maximize profits by attracting the appropriate mix of buyers and sellers into the market. We begin by empirically investigating the key assumptions of the model which deliver (computational and empirical) tractability, and find that they are reasonable. We then estimate consumer demand, market supply, and the distributions of market entrants (this part still in progress). These figures are plugged into the Bodoh-Creed (2011) framework in order to compute optimal fee schedules and draw comparisons to actual fee schedules, as well as to make policy prescriptions.

Suggested Citation

  • Aaron Bodoh-Creed & Jörn Boehnke & Brent R. Hickman, 2013. "Optimal Design of Two-Sided Market Platforms: An Empirical Case Study of eBay," Working Papers 13-22, NET Institute.
  • Handle: RePEc:net:wpaper:1322
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    File URL: http://www.netinst.org/Creed_Boehnke_13-22.pdf
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    References listed on IDEAS

    as
    1. Peters, Michael & Severinov, Sergei, 2006. "Internet auctions with many traders," Journal of Economic Theory, Elsevier, pages 220-245.
    2. Hickman Brent R. & Hubbard Timothy P. & Sağlam Yiğit, 2012. "Structural Econometric Methods in Auctions: A Guide to the Literature," Journal of Econometric Methods, De Gruyter, vol. 1(1), pages 67-106, August.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Online Auctions; eBay; Market Design; Large Markets;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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