Comparing revenue from auctions and posted prices

I analyze the market for compact discs using an original data set of items listed for sale online. Over 5000 listings of both new and used compact discs were collected from eBay (which provides sellers a choice between two mechanisms: auction or posted price) and its subsidiary, Half.com (which feat...

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Bibliographic Details
Published in:International journal of industrial organization 2010, Vol.28 (1), p.1-9
Main Author: Hammond, Robert G.
Format: Article
Language:English
Subjects:
Auction
Auction econometrics
Auction Posted price Optimal mechanism Auction econometrics
Auctions
Comparative analysis
Comparative studies
Economic theory
Electronic commerce
Internet
Inventories
Music
Optimal mechanism
Posted price
Prices
Pricing
Profit
Revenue
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Summary:I analyze the market for compact discs using an original data set of items listed for sale online. Over 5000 listings of both new and used compact discs were collected from eBay (which provides sellers a choice between two mechanisms: auction or posted price) and its subsidiary, Half.com (which features only posted prices). Despite the often cited revenue-dominance property of auctions, many sellers choose to post a fixed price. To explain this anomaly, I examine empirically the determinants of the revenue earned by sellers in this market. I find that posted-price goods sell for higher prices, while auctioned goods sell with a higher probability. Further results suggest that the size of a seller's inventory is the key factor in the choice between selling in an auction and posting a fixed price. In particular, sellers with large inventories are more likely to use the posted-price mechanism.
ISSN:0167-7187
1873-7986
DOI:10.1016/j.ijindorg.2009.06.002