The Effect of Negative Buyer Feedback on Prices in Internet Auction Markets

The success of the Internet economy depends largely on how parties establish trust in their transactions. Building on the premise that the major role of Internet intermediaries is to ensure efficient and safe transactions between buyers and sellers, this study tested how buyer’s feedback scores on sellers accumulated from previous transactions affect the final bidding prices in the electronic auction market

The Effect of Reputation on Selling Prices in Auctions

In economic approaches it is often argued that reputation considerations influence the behavior of individuals or firms and that reputation influences the outcome of markets. Empirical evidence is rare though. In this contribution we argue that a positive reputation of sellers should have an effect on selling prices. Analyzing auctions of popular DVDs at eBay we, indeed, find support for this hypothesis. Secondary, we unmask the myth that it is promising for eBay sellers to let their auction end at the evening, when many potential buyers may be online

Economic Insights from Internet Auctions: A Survey

This paper surveys recent studies of Internet auctions. Four main areas of research are summarized. First, economists have documented strategic bidding in these markets and attempted to understand why sniping, or bidding at the last second, occurs. Second, some researchers have measured distortions from asymmetric information due, for instance, to the winner's curse. Third, we explore research about the role of reputation in online auctions. Finally, we discuss what Internet auctions have to teach us about auction design.

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

Country-Specific Effects of Reputation and Information: A Comparison of Online Auctions in Germany, the UK, and the US

Empirical studies on the effect of sellers’ reputation on closing prices in online auctions present mixed results. A large number of studies addresses reputational effects in one country, especially in the US. Only a small number of cross-country studies inspect the moderating role of institutional frameworks on bidder behavior. The purpose of this paper is to examine if country-specific differences in the formal and informal institutional framework influence the effects of reputation and information signals on final prices in online auctions. From the perspective of the New Institutional Economics, management decisions and individuals’ characteristics are affected by the institutional framework, which consists of cultural aspects as well as a set of social and legal rules and regulations. Therefore, bidders that are influenced by one institutional framework have different preferences, expectations, and perceptions about reputation and information in online auctions than individuals socialized by another institutional framework. In order to examine the effects of reputation and information on prices as well as to asses cross-country similarities and differences in these effects, a sample of 6,166 homogenous online auctions, conducted on the respective eBay websites in Germany, the UK, and the US, is analyzed. The results suggest that either the effects of reputation and product information variables vary significantly across countries or that different variables have an impact on prices in different countries. It can be concluded that country-specific institutional frameworks influence bidder behavior in international online auction markets.reputation, information, online auctions, cross-country studies

Does Laboratory Trading Mirror Behavior in Real World Markets? Fair Bargaining and Competitive Bidding on EBay

We conducted a controlled field experiment on eBay and examined to what extent both social and competitive laboratory behavior is robust to institutionally complex real world markets with experienced traders, who selected themselves into these markets. EBay’s natural trading system provides bridges between lab and field environment that can be exploited to explore differences in behavior in the two environments. We find that many sellers do not make use of their commitment power as predicted by standard theories of both selfish and social behavior. However, a concern for equity strongly affects outcomes and reputation building in bilateral bargaining, while buyer competition effectively masks this concern and robustly yields equilibrium outcomes. The dichotomy of behaviors mirrors observations in laboratory research. Furthermore, we find that behavioral patterns in the field experiment mirror fully naturally occurring trading patterns in the market.eBay, auctions, behavioral economics, trust, market design

Engineering Trust - Reciprocity in the Production of Reputation Information

Reciprocal feedback distorts the production and content of reputation information, hampering trust and trade efficiency. Data from eBay and other sources combined with laboratory data provide a robust picture of how reciprocity can be guided by changes in the way feedback information flows through the system, leading to more accurate reputation information, more trust and more efficient trade.market design; reputation; trust; reciprocity; eBay

Engineering Trust - Reciprocity in the Production of Reputation Information

Reciprocity in feedback giving distorts the production and content of reputation information in a market, hampering trust and trade efficiency. Guided by feedback patterns observed on eBay and other platforms we run laboratory experiments to investigate how reciprocity can be managed by changes in the way feedback information flows through the system, leading to more accurate reputation information, more trust and more efficient trade. We discuss the implications for theory building and for managing the redesign of market trust systems.market design, reputation, trust, reciprocity, eBay

Auction Markets for Specialty Food Products with Geographical Indications

We present a first analysis of auction markets for specialty food products. We identify auction prices, trade volume and value for domestic and foreign origin specialty ham with geographical indications (GIs) which were actually sold in online auctions in Germany within a one-month period. Applying hedonic modeling, we examine potential factors that may influence online bidding behavior and final auction prices. We estimate positive auction price effects for weight, bidding activity, and auction length, that the domestic product is sold at a discount, that higher shipping cost have a negative impact on final prices, and that auctions ending on Fridays and Saturdays yield lower prices. The model may be used to estimate the value of GIs. In our example, we estimate relative price differences of 20-30% for the GIs of three specialty hams (Prosciutto di Parma, Jamon Serrano, Schwarzwalder).consumer economics, geographical indications, auctions, information, Marketing, D12, D44, D83,

Buy it now: A hybrid market institution

This paper analyzes seller choices and outcomes in approximately 700 Internet auctions of a relatively homogeneous good. The ‘Buy it Now’ option allows the seller to convert the auction into a posted price market. We use a structural model to control for the conduct of the auction as well as product and seller characteristics. In explaining seller choices, we find that the ‘Buy it Now’ option was used more often by sellers with higher ratings and offering fewer units; and posted prices were more prevalent for used items. In explaining auction outcomes, we find that auctions with a ‘Buy it Now’ price had higher winning bids, ceteris paribus, whether or not the auction ended with the ‘Buy it Now’ offer being accepted, possibly reflecting signaling or bounded rationality. We also find that posting prices, by combining ‘Buy it Now’ and an equal starting price, was an effective strategy for sellers in the sample.Market institutions; posted prices; auctions; e-commerce