3. August 2006

What Affects Prices on Internet Auctions


Money

Obviously, prices of internet auctions depend heavily on what is offered and how much demand exists for this particular good. These are basic rules of market economy, but there are also specific rules for internet auctions:

Reputation

On sites like eBay reputation roughly equals the ratings of the seller. Interestingly, the total number of negative ratings has little effect on the end price. It’s the percentage of negative ratings which is important.

Sellers: Get a good reputation (surprise).
Buyers: If you like risks, buy from sellers which have a bad reputation. You might save some money… or you might get ripped off.

End Time

A popular myth tells that auctions that end in the evening result in higher prices. The contrary is the case. There are so many offers in the evening – probably because of the myth – that the competition is higher and prices are lower.
An ending on the weekend has no effect on the price, nor does the duration of the auction.

Sellers: Sell during work hours or on the weekend.
Buyers: Look for auctions in the evening.

Shipping Costs (!)

While it is obvious that bidders tend to subtract the shipping costs from their maximum bid, it is kinda surprising that they do not do this proportional. When shipping costs rise, the winning bid tends to be reduced by more than twice the difference.

Sellers: Keep your shipping costs low.
Buyers: Look for auctions with high shipping costs, they might sum up cheaper.

Accessibility

Basic market rules only apply if the market can find the product. Auctions which are poorly described or misspelled can be largely ignored by the bidders and end with lower winning bids.

Sellers: Design your offer with care and beware the evil typo.
Buyers: Look for misspelled auctions. (Hint: misspelledauctions.com, a search engine for misspelled auctions)

Next time you engage in internet auctions, pay attention to these factors. You might save/gain a few bucks.


Scientific sources: “The Effect of Reputation on Selling Prices in Auctions” (regarding reputation and auction ending), “Vertrauen und Reputationseffekte bei Internet-Auktionen” (regarding shipping costs)

Topics: accessibilityauctionseBaymoneypricereputationshippingtime

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