Determinants of Final Prices in eBay Auctions
I have just read two studies which look into the factors effecting final prices in eBay Auctions. Ryan Praskievicz studies the prices for 30GB iPods for his study The Determinants of Final Bid Price in eBay Auctions and Lucking-Reiley et al use coins in their study, Pennies from eBay. The main findings of the reports were as follows:
- Feedback matters, especially negative feedback. Lucking-Reiley et al found that a 1% increase in the seller’s positive feedback ratings yields a 0.03 increase in the auction price on average. The effect of negative feedback ratings is much larger opposite effect: a 1% increase causes a 0.11% decrease in auctio price on average.
- Being a Powerseller matters. Praskievicz found that on average Powersellers got $7.71 for their iPods with all other factors being equal.
- Buyers do not pay attention to postage prices. In much the same way that restaurant goers do not factor in the tip into the price of their meal, Praskievicz found that an $1 increase in shipping costs only lead to a $0.80 decrease in final sale price. The effect was greater for Powersellers at $0.71
- Longer durations lead to higher prices. Lucking-Reiley et al found that Three-day auctions and five-day auctions yield approximately the same prices on average. 7-day auction prices are approximately 24% higher and 10-day auctions are 42% higher, on average.
- Buy it nows give higher prices. Buyers are willing to pay for convenience when purchasing commodity items such as iPods. Praskievicz found that buy it nows yielded an average of $5.09 over auction prices