EBay Or Not To eBay?
From the Briefcase: Research produced by America's Best Business Schools
Do Buyers Have Too Much Information?
"It's not particularly shocking that bidders take the future into account and lower their bids when future items are more desirable," says Zeithammer. "What's surprising is that bidders are very sensitive to details about the future–the specific brands and models offered, as well as the time until the next sale. This is good news for eBay and for the market as a whole."
Prices moving in the predicted direction as people bid more or less on specific items indicates that the market clears at the correct prices.
Zeithammer's findings may have an impact on seller strategies, raising the question of whether the interauction competition found on eBay limits the potential of sequential auctions as trading institutions. Sellers were assumed to be nonstrategic throughout the paper, but allowing for strategic selling may in turn change the bidder's strategy. Zeithammer is working on another paper that examines strategic selling.
"It's important to consider how an auction is designed in the first place," notes Zeithammer. "Given the implications for sellers, eBay should think about how comparable they want items to be, and whether or not it's a good idea for bidders to be able to see auctions for all identical products."
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