The eBay Evening Fallacy and the effect of feedback on Selling Price
Aug-2006
A new paper by Oliver Gurtler and Christian Grund entitled The Effect of Reputation on Selling Prices in Auctions has produced some interesting results about one of the fundamental pillars of eBay – the feedback system, and about one of the fundamental assumptions – it is better to list in the evening.
The effect of feedback on selling prices
In this study, they used information on more than 300 auctions of new DVDs that took place on www.ebay.de in November and December 2005 to analyze whether feedback scores effected selling prices in eBay selling prices. They found whilst the absolute number of negative feedbacks had no effect no on selling prices, the percentage of negatives has a strong and highly significant effect.
They found that an increase in the share of negative feedbacks of one percentage point decreases the selling price of 4 per cent. On average, a seller with 1 per cent negative ratings should receive about € 0.50 (US-$ 0.60) more per DVD than a seller with 2 per cent negative ratings.
Postage cost and their effect on selling price
Another interesting results was that postage costs affects sales revenue negatively. However, an increase of postage in the amount of 1 € does decrease the price only by the amount of 5 per cent on average, which means by about 60 Cent at an averaged price of 12 €. Hence, sellers can make money by demanding an above average postage.
The eBay evening fallacy
Finally, the paper has some very interesting insights into auction timing. The end of the auction at the weekend has no significant effect on the price. Also the duration of auctions has, no effect on the price.
Most controversally it was found that selling prices are significantly lower in auctions which end in the evening. Probably, many sellers expect the opposite. That is why the auctions, indeed, end in the evening hours in large part. Hence, sellers do not keep in mind the supply side of the market. Although page impressions at eBay may be higher
during the evening hours, the simultaneously larger supply dominates the demand effect.