Seller strategies on eBay: Does size matter?

We examine seller strategies in 1177 Internet auctions on eBay, to understand the diversity of strategies used, and their impacts. Dimensions of strategic choice include the use of a ‘Buy it Now’ option, the level of the starting price, and the use of a secret reserve price. A major focus of our analysis is on differences across sellers with different volumes of sales. The largest volume sellers (termed “retailers”) in our sample employ uniform selling strategies, but lower volume sellers exhibit a wide variety of strategic choices. While some components of sellers’ strategies appear important in raising seller revenue, including starting the auction with a ‘Buy it Now’ offer, the overall impact of seller strategy choices on the outcome appears to be quite small. We interpret this as evidence for the competitiveness of the online auction market for frequently traded items with conventional retail alternatives. An exception is provided by the use of a secret reserve price, which raises the winning bid conditional on a sale, but reduces the probability of a sale. Depending on sellers’ risk aversion and impatience, this may also be an efficient outcome

Seller strategies on eBay: Does size matter?

We examine seller strategies in 1177 Internet auctions on eBay, to understand the diversity of strategies used, and their impacts. Dimensions of strategic choice include the use of a ‘Buy it Now’ option, the level of the starting price, and the use of a secret reserve price. A major focus of our analysis is on differences across sellers with different volumes of sales. The largest volume sellers (termed “retailers”) in our sample employ uniform selling strategies, but lower volume sellers exhibit a wide variety of strategic choices. While some components of sellers’ strategies appear important in raising seller revenue, including starting the auction with a ‘Buy it Now’ offer, the overall impact of seller strategy choices on the outcome appears to be quite small. We interpret this as evidence for the competitiveness of the online auction market for frequently traded items with conventional retail alternatives. An exception is provided by the use of a secret reserve price, which raises the winning bid conditional on a sale, but reduces the probability of a sale. Depending on sellers’ risk aversion and impatience, this may also be an efficient outcome.Internet auctions; posted prices; market institutions

Different Prices for Identical Products? Market Efficiency and the Virtual Location in B2C E-Commerce

This paper analyses market efficiency and the role of the virtual location in digital markets using a data set containing more than 23,000 price observations from the online market for contact lenses as well as detailed information about online retailer and product characteristics. The data allow to implement and test the concept of virtual location. The empirical results reveal evidence for lower prices and less price dispersion among e-retailers in comparison to hybrid retailers, which supports the hypothesis of enhanced market efficiency in electronic markets. Furthermore, the results show that an online shop?s virtual location influences its prices and that differences in prices are partially driven by differentiation in retailer service. A decomposition of the price differential reveals that there may indeed be a competition effect. --electronic markets,efficiency,virtual location,pricing

Retail positioning through customer satisfaction: an alternative explanation to the resource-based view

Through exploring factors influencing effective retail positioning strategies in an emerging market environment, this paper challenges the role of isolation mechanism and heterogeneous idiosyncrasy argued by the resource-based view theory. By drawing on a sample of 11,577 customers from hypermarkets, electronic appliance specialty stores and department stores in major Chinese cities, we set up ten hypotheses and confirm a nine-item model for customeroriented retail positioning (perceived price, store image, product, shopping environment, customer service, payment process, after-sales service, store policies, and shopping convenience). Our results show that different retail formats achieve success through the implementation of similar positioning strategies, in which case, it is not heterogeneity but homogeneity that contributes to retailers' success greatly at the development stage of retail expansion. Our results challenge previously proved effectiveness of inimitability to success by the resource-based view, and support homogenous idiosyncrasy of retailers in the implementation of customer-oriented positioning strategies in an emerging market

Internet Retail Demand: Taxes, Geography, and Online-Offline Competition

Data on sales of memory modules are used to explore several aspects of e-retail demand. There is a strong relationship between e-retail sales to a given state and sales tax rates that apply to purchases from online retailers. This suggests that there is substantial substitution between online and online retail, and tax avoidance may be an important contributor to e-retail activity. Geography matters in two ways: we find some evidence that consumers prefer purchasing from firms in nearby states to benefit from faster shipping times as well as evidence of a separate preference for buying from in-state firms. Consumers appear fairly rational in some ways, but boundedly rational in others.

Consumers and sellers heterogeneity, search costs and spatial price dispersion in retail food markets

— Price dispersion, i.e. a homogeneous product sold at different prices by different sellers, is among the most replicated findings in empirical economics. The paper assesses the extent and determinants of spatial price dispersion for 14 perfectly homogeneous food products in more than 400 retailers in a market characterized by the persistence of a large number of relatively small traditional food stores, side by side with large supermarkets. The extent of observed price dispersion is quite high, suggesting that, despite their large number, monopolistic competition prevails among sellers as a result of the heterogeneity of services offered. When prices in an urban area (where the spatial concentration of sellers is much higher and consumer search costs significantly lower) have been compared with those in smaller towns and rural areas, differences in search costs and the potentially higher degree of competition did not yield lower prices; quite the contrary, they were, on average, higher for 11 of the 14 products considered. Supermarkets proved to be often, but not always, less expensive than traditional retailers, although average savings associated to food shopping at supermarkets were extremely low. Finally, the results of the study suggest that sellers behave differently in their pricing decision strategies; these differences emerge both at the firm level and, for supermarkets, within the same chain. The fact that products considered were homogeneous, purchases frequently repeated, the number of sellers large, and search costs relatively low, did not suffice to keep price dispersion low. Based on the results presented in the paper, it is clear that more important in explaining price dispersion is the contemporaneous heterogeneity of retailers (in terms of services rendered) and consumers (in terms of their propensity to search and shopping preferences), which makes it possible for a monopolistic competition structure of the market to emerge and for small traditional food retail stores to remain in business.Price dispersion, retail pricing, food markets., Agribusiness, Agricultural and Food Policy, Community/Rural/Urban Development, Food Consumption/Nutrition/Food Safety, Labor and Human Capital,

A Distributed Demand-Side Management Framework for the Smart Grid

This paper proposes a fully distributed Demand-Side Management system for Smart Grid infrastructures, especially tailored to reduce the peak demand of residential users. In particular, we use a dynamic pricing strategy, where energy tariffs are function of the overall power demand of customers. We consider two practical cases: (1) a fully distributed approach, where each appliance decides autonomously its own scheduling, and (2) a hybrid approach, where each user must schedule all his appliances. We analyze numerically these two approaches, showing that they are characterized practically by the same performance level in all the considered grid scenarios. We model the proposed system using a non-cooperative game theoretical approach, and demonstrate that our game is a generalized ordinal potential one under general conditions. Furthermore, we propose a simple yet effective best response strategy that is proved to converge in a few steps to a pure Nash Equilibrium, thus demonstrating the robustness of the power scheduling plan obtained without any central coordination of the operator or the customers. Numerical results, obtained using real load profiles and appliance models, show that the system-wide peak absorption achieved in a completely distributed fashion can be reduced up to 55%, thus decreasing the capital expenditure (CAPEX) necessary to meet the growing energy demand

Referral Infomediaries and Retail Competition

An important phenomenon on the Internet has been the emergence of "infomediaries" or Internet referral services such as Autobytel.com and Carpoint.com in the automobile industry, Avviva.com in real estate and Healthcareadvocates.com in medicine. These services offer consumers the opportunity to get price quotes from enrolled brick-and-mortar retailers as also information on invoice prices, reviews and specifications before they commence the shopping process. Internet referral services also direct consumer traffic to particular retailers who join them. The view of industry analysts and practitioners is that these services are a boon to consumers who can use them to get better prices from retailers. What is less clear though is the manner in which these infomediaries affect the market competition between retailers. In this paper, we analyze the impact of referral infomediaries on the functioning of retail markets and the contractual arrangements that they should use in selling their services. We identify the market conditions under which the business model represented by these services would be viable and also provide an understanding of how this institution would evolve with the growth of the Internet. The model that we develop captures the key economic characteristics that define an Internet referral infomediary. On the consumer side, a referral infomediary performs the function of "price discovery": a consumer can use the service to costlessly get an additional retail price quote before purchase. On the firm side, a referral service endows an enrolled retailer with the ability to price discriminate between consumers who come through the service and those who come directly to the store. Specifically the model consists of a referral infomediary and a market with two downstream retailers who compete in price. The retail market is comprised of three consumer segments: a segment loyal to each retailer and a comparison shopping segment that shops on the basis of the lowest price. The referral infomediary reaches some proportion of the total consumer population and this characterizes the reach of the Internet in this market. The impact of the infomediary on the market is best illustrated by the case in which one of the retailers is enrolled in the institution. We show that the referral price will always be lower than the retail store price offered by an enrolled dealer. The incentives of the retailer while setting the on-line referral price are driven not only by the comparison shoppers who search at both stores, but also the consumers who would have searched only at the competing store. Thus the use of a referral service as a price discrimination mechanism leads to lower online prices. Next, the profits of the enrolled dealer first increase and then decrease with the reach of the institution. One might find this surprising because the referral service provides the enrolled retailer the benefit of price discrimination as well as the benefit of additional demand (because the retailer gets the opportunity to quote a price to all online customers, some of whom were not previously accessible). However, the referral service also creates a competitive effect because it helps an enrolled retailer to poach on its competitor's customers who were previously unavailable. The strategic response by the competitor is to price aggressively in order to protect its loyal base and this intensifies price competition leading to lower equilibrium profits. This competitive effect increases with the reach of the infomediary. As a result, the profits of the enrolled retailer first increases and then decreases with the reach of the referral infomediary. We also show that the referral infomediary should prefer an exclusive strategy of allowing only one of the two retailers to enroll. A non-exclusive strategy implies that consumers who use the service will get referral prices from both retailers leading to Bertrand type competition for these consumers. Interestingly, we find that the referral service can unravel (in the sense that neither retailer can get any net profit from joining) when its reach becomes too large. In this case, any retailer that joins can poach upon a large proportion of its competitor's customers leading to intense price competition. Consequently, the joining firm will make less profits than if it had not joined. This provides a rationale for the current attempts by firms such as Autobytel to diversify aggressively into additional service areas. We extend the model to the case where the referral infomediary can identify the different consumer segments and show that consumer identification can prevent the infomediary from unraveling when the reach of the institution increases. Finally, we extend the model to the cases in which retailer loyalty is asymmetric and in which the reach of the Internet can vary across the different segments.Referral Services, Infomediaries, Internet, Price Discrimination, Retail Competition. ,

PRICE DISPERSION, SEARCH COSTS AND CONSUMERS AND SELLERS HETEROGENEITY IN RETAIL FOOD MARKETS

Price dispersion, i.e. a homogeneous product sold at different prices by different sellers, is among the most replicated findings in empirical economics. The paper assesses the extent and determinants of spatial price dispersion for 14 perfectly homogeneous food products in more than 400 retailers in a market characterized by the persistence of a large number of relatively small traditional food stores, side by side large supermarkets. The extent of observed price dispersion is quite high, suggesting that monopolistic competition prevails as a result of the heterogeneity of services offered. When prices in an urban area (where the spatial concentration of sellers is much higher and consumer search costs significantly lower) have been compared with those in smaller towns and rural areas, differences in search costs and the potentially higher degree of competition did not yield lower prices; quite the contrary, they were, on average, higher for 11 of the 14 products considered. Supermarkets proved to be often, but not always, less expensive than traditional retailers, although average savings from food shopping at supermarkets were extremely low. Finally, the results of the study suggest that sellers behave differently in their pricing strategies; these differences emerge both at the firm level, and for supermarkets within the same chain. The fact that products considered were homogeneous, purchases frequently repeated, the number of sellers large, and search costs relatively low, did not suffice to keep price dispersion low. From the results presented in the paper, it is clear that what is important in explaining price dispersion is the contemporaneous heterogeneity of retailers (in terms of services) and consumers (in terms of search and shopping preferences), which makes it possible for a monopolistic competition structure of the market to emerge and for small traditional food retailers to remain in business.Price dispersion, Retail pricing, Food markets