How eBay Sellers set “Buy-it-now†prices - Bringing The Field Into the Lab

In this paper we introduce a new type of experiment that combines the advantages of lab and field experiments. The experiment is conducted in the lab but using an unchanged market environment from the real world. Moreover, a subset of the standard subject pool is used, containing those subjects who have experience in conducting transactions in that market environment. This guarantees the test of the theoretical predictions in a highly controlled environment and at the same time enables not to miss the specific features of economic behavior exhibited in the field. We apply the proposed type of experiment to study seller behavior in online auctions with a Buy-It-Now feature, where early potential bidders have the opportunity to accept a posted price offer from the seller before the start of the auction. Bringing the field into the lab, we invited eBay buyers and sellers into the lab to participate in a series of auctions on the eBay platform. We investigate how traders' experience in a real market environment influences their behavior in the lab and whether abstract lab experiments bias subjects' behavior.

[1]  Steven T. Anderson,et al.  Buy it Now: A Hybrid Internet Market Institution , 2004 .

[2]  Timothy Mathews,et al.  A Risk Averse Seller in a Continuous Time Auction with a Buyout Option , 2003 .

[3]  Timothy Mathews.  Bidder Welfare in an Auction with a Buyout Option , 2006, IGTR.

[4]  Durham Yvonne,et al.  eBay's Buy-It-Now Function: Who, When, and How , 2004 .

[5]  Brett Katzman,et al.  The role of varying risk attitudes in an auction with a buyout option , 2006 .

[6]  Abraham Seidmann,et al.  Managing Online Auctions: Current Business and Research Issues , 2003, Manag. Sci..

[7]  K. Srinivasan,et al.  When auction meets fixed price: a theoretical and empirical examination of buy-it-now auctions , 2008 .

[8]  Alvin E. Roth,et al.  An Experimental Analysis of Ending Rules in Internet Auctions , 2003 .

[9]  John Wooders,et al.  Auctions with a buy price , 2004 .

[10]  Lisa N. Takeyama,et al.  Buy prices in online auctions: irrationality on the internet? , 2001 .

[11]  Andrew B. Whinston,et al.  Buy-price English auction , 2006, J. Econ. Theory.

[12]  David Lucking-Reiley,et al.  Using field experiments to test equivalence between auction formats: Magic on the internet , 1999 .

[13]  Ronald M. Harstad,et al.  Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study , 1987 .

[14]  Radosveta Ivanova-Stenzel,et al.  Price formation in a sequential selling mechanism , 2008 .

[15]  Ronald L. Oaxaca,et al.  IS BIDDING BEHAVIOR CONSISTENT WITH BIDDING THEORY FOR PRIVATE VALUE AUCTIONS , 2002 .

[16]  Timothy Mathews,et al.  The Impact of Discounting on an Auction with a Buyout Option: a Theoretical Analysis Motivated by eBay’s Buy-It-Now Feature , 2004 .

[17]  Gary Charness,et al.  When Optimal Choices Feel Wrong: A Laboratory Study of Bayesian Updating, Complexity, and Affect , 2004 .

[18]  Alvin E. Roth,et al.  Late and Multiple Bidding in Second Price Internet Auctions: Theory and Evidence Concerning Different Rules for Ending an Auction , 2003, Games Econ. Behav..

[19]  Andrew T. Brint,et al.  Investigating buyer and seller strategies in online auctions , 2003, Journal of the Operational Research Society.

[20]  A. Roth,et al.  Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet , 2002 .

[21]  Jérémie Gallien,et al.  Temporary and Permanent Buyout Prices in Online Auctions , 2007, Manag. Sci..