Atl Econ J (2009) 37:383395 DOI 10.

1007/s11293-009-9179-5 O R I G I N A L PA P E R

The Effect of Alternative e-Prices on eBay Book Auctions

Jannett Highfill & Kevin M. OBrien

Published online: 2 May 2009 # International Atlantic Economic Society 2009

Abstract This paper uses the usual eBay auction variables and some data from ABE and Amazon, namely, lot size and the alternative e-price, the lowest price for a given book on a given site, to examine in the question of how information from ABE and Amazon affects eBay auction outcomes. We find that although lot-size sometimes affects bids and final sale price, the alternative e-price effects are more important. Sellers on eBay set their minimum prices below the alternative e-prices, but the closer the minimum price is set to the alternative e-price, the lower the final sale price. Decomposing this result into bidding versus final sale price per se effects, our evidence suggests that the primary comparison shopping effect is on bidding behavior. Keywords Auctions . eCommerce JEL D44 . L81 Comparison shopping, that most economic of activities, is essentially an information problem, and information gathering by foot, automobile, or telephone quickly runs into diminishing returns. The internet is supposed to be changing all of that. As a shopping venue the internet has evolved into two different shopping modes: auctions, where eBay is the dominant site, and fixed-price sites (internet catalog sales). The issue posed by the present paper is whether potential bidders adjust their eBay bidding behavior in light of the alternative e-price, the lowest price on a given site, and/or the available quantity, the lot size, on the internet fixed-price sites. A secondary question is how the comparison shopping variables affect eBay outcomes, whether the item sold, and final sale price. The paper considers book auctions because there are two well-known non-auction book buying internet sites, ABE and
J. Highfill : K. M. OBrien (*) Department of Economics, Bradley University, Peoria, IL 61625, USA e-mail: KMO@BRADLEY.EDU

384

J. Highfill, K.M. OBrien

Amazon. Both are umbrella sites for many sellers, and make price and other information quickly and easily available to potential buyers. Controlling for auction characteristics, the present paper finds that although there is sometimes a lot-size effect on the number of bids and the final sale price, the comparison shopping effect works primarily through the alternative e-price effects. In general, sellers on eBay set their minimum prices (starting bid) below the alternative e-prices. But the closer the minimum price is set to the alternative e-price, the lower the final sale price. Decomposing this result into on effect on bids versus an effect on sales price per se, the evidence suggests that the former effect dominates. Setting a minimum price too close to the alternative e-price, even if still below it, seems to discourage potential bidders. The economics literature has used eBay data to study a number of questions relating to auction theory, particularly bidding behavior. Roth and Ockenfels (2002), for example, find bidders bid late in the auction interval although, in a follow-up paper, Wintr (2008) finds that late bidding does not lead to collusive gains for bidders. Adams (2007) empirically estimates the distribution of values from which bids are drawn while Cheema (2008) investigates the question of how shipping and handling fees affect bids. Highfill and OBrien (2009) discuss the issue of whether bidders are likely to be subject to the winners curse. A perennial issue in the literature is whether bidders respond to the feedback ratings of sellers; see Andrews and Benzing (2007) for a recent treatment. There is also a growing literature about how various non-eBay prices affect eBay auction outcomes. Highfill and OBrien (2007) and Lucking-Reiley et al. (2007), for example, study how book prices affect selling prices. Unlike alternative e-prices, book prices are abstract or hypotheticalnot an actual selling price from a specific vendor. There is a similar literature that uses reference price, some hypothetical or abstract price in the buyers mind, to test various auction outcomes. Being unobservable, various proxies are used. Dholakia and Simonson (2005), for example, use the minimum bid of another auction on eBay of the identical product. Comparing auctions where bidders are instructed to compare prices and ones without such an instruction, they find that the former had fewer bids. Amyx and Leuhling (2006) study the phenomenon of over-bidding, when buyers bid more than a reference price published on the same site. It is not clear whether their reference price is an actual price. Much of the work in the reference price literature is concerned with how a seller can use a reference price to persuade the customer that he or she is getting more value from a particular sale and/or pay more for the item. Kamins et al. (2004) use the reserve price and the starting price as reference points and find that the former, when it exists, has a greater influence on the final price. Shunda (2007), assuming consumers construct a reference price from eBays buy-it-now price and the reserve price, argues that a revenue maximizer would use a buy-it-now price. Rosenkranz and Schmitzs (2007) argue that sellers should set a reserve price to increase the buyers reference price. Hardesty and Suter (2005) find a positive relationship between consumer product valuations and (especially non-internet) reference prices. On the other hand, in a recent study Trautmann and Traxler (2008), find that no reference price effect exists. In sum, although many questions relating comparison prices, bidding behavior, and auction outcomes have been investigated, as far as we

The Effect of Alternative e-Prices on eBay Book Auctions

385

are aware, this is the first paper to investigate the effect of our comparison shopping variables on eBay bidding behavior and auction outcomes. The paper proceeds by making a few brief comments about auction theory and especially bidder behavior. The data is explained in the next section, the empirical model is then presented, after which the empirical results are given. A few comments conclude.

A Brief Look at Bidder Behavior Of the traditional auction types, eBay auctions are closest to second price sealed-bid auctions. Bidders simultaneously submit a sealed bid; the winner is the bidder with the highest bid; the winner pays the amount of the second highest bid. Additionally, a unique item is auctioned once, bidders values are derived from a distribution of reservation prices, and the only decision bidders make is value of the bid itself, although the bid amount may depend on, for example, whether or not the item has a common value and is thus subject to the winners curse. But standard auction literature does not capture the complexity of bidding in eBay auctions. In the case that the item could be purchased immediately from another non-auction vendor, a bidder might have a reservation price above the starting price, and still decide to not bid on the item, even if there are no other bidders in the auction. This possibility is not imagined in non-eBay auctions. Bidding is nothing like simultaneous. Different bidders can bid at different times, and several days may elapse between subsequent bids of a given bidder. eBay auctions allow plenty of time for comparison shopping. A potential bidder on an eBay auction incurs costs as compared to buying from a fixed price site. The bidder must wait as much as ten days until the auction closes to see whether he or she has won the item, and, there is the possibility that he or she does not win the auction. Because these costs can be avoided by simply buying from a fixed price site, a potential buyer will bid on the item if there appears to be a reasonable chance that he or she can get it more cheaply on eBay. A potential bidder will be less likely to participate in an auction the closer the auctions minimum price or starting bid is to the alternative price. Bidders might use apparent scarcity in their decision making as well. Unlike a typical auction where there is always a reasonable probability of not winning and thus not getting the item, when the number of books available on the alternative sites is large the effective probability of not being able to get the book anywhere might be quite small. On the other hand, buyers may have had the experience of buying a book from one of the alternative sites only to get an email a few days later saying it is not available. Thus the fewer available elsewhere, the more likely a bidder may be to bid on an eBay item, to improve their chances of obtaining the item. Finally, just as potential eBay bidders might take information from Amazon or ABE into account in their decision making, potential buyers from the latter sites might well take information from eBay into account in their decision making. The present study does not examine that possibility because even basic data sales is not available from the Amazon or ABE sites; list prices are available, but not sales or even actual price, whether, for example, an Amazon customer used a coupon. Further, since the data we have is from the eBay site (except, of course, for the

386

J. Highfill, K.M. OBrien

comparison shopping data) it does not seem appropriate to use any methodology which does not use all the eBay explanatory variables in the eBay regressions.

Data Data were collected for 292 book auctions on the eBay website between January and March, 2008; the data are limited to U.S. sellers. Descriptive statistics are in Table 1. As will be seen shortly, final sales price, whether the item sold, and number of bids are the dependent variables in the regression analysis. For the final sales price, the mean was 12.55 dollars. Of the 292 auctions in the sample, 193 books, or 66%, were actually sold. Conversely, 99 books, or 34%, were unsold. The mean number of bids is 2.79.

Table 1 Descriptive statistics Variable Final sales price Minimum bid Item sold Bids Buy-it-now Weekend closing Shipping and handling Paypal Money order/Cashiers check Personal check First edition New book Autographed Actual picture Stock picture Antique Childrens Fiction Nonfiction Seller feedback ABE lot ABE price Amazon lot Amazon price ABE price difference Amazon price difference N Mean 12.55 8.84 .66 2 .79 .11 .28 4 .64 .97 .64 .34 .29 .2 .03 .47 .5 .17 .17 .20 .21 98.09 28.66 14.00 76.78 15.32 5.16 6.47 292 Standard Deviation 29.70 16.73 4.51 2.48 12.72 65.81 58.26 124.40 39.66 57.82 37.76 Min 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 800.05 425.00 Max 354.22 99.99 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 100.00 559.00 810.00 872.00 500.00 99.00 99.00

The Effect of Alternative e-Prices on eBay Book Auctions

387

Of the independent variables, the mean minimum bid set by the seller, sometimes interpreted as the reserve price, was $8.84. Given the mean final sales price, the mean minimum bid was 70.4% of the final sales price. Other auction characteristics are measured by a number of binary variables. The buy-it-now option allows the buyer to terminate the bidding process by paying a set price determined by the seller. The variable takes a value of one if this purchase option was available for an auction and was zero, otherwise. For this sample only 11% of the sellers offered this option. Another auction characteristic is closing day of the week; a value of one denotes a weekend closing. Given that 28% of the auctions ended on a weekend, the latter was no more likely than a weekday closing. The next variable measured shipping and handling fees, with a mean of $ 4.64. The next set of variables reflects the methods of payment. Paypal is an electronic form of payment and is very popular among sellers with 97% of the sellers accepting it. Money orders and cashiers checks were accepted by 64% of the sellers. Personal checks were only accepted by 34% of the sellers. Since these various methods of payment are not mutually exclusive, each method of payment will be represented by its own binary variable in the empirical model. The next set of variables measure various book characteristics and all are binary. In the sample, 20% were new books with only 3% being autographed by the author. Forty-seven percent of auctions showed an actual picture of the book while 50% showed a stock picture. eBay lists books by five broad categories: antique, childrens, fiction, nonfiction, and textbooks, with the latter being the fifth and default category in the regressions. All five categories were represented about evenly in the sample. The final auction variable measures the sellers reputation and is calculated as the percentage of positive reviews a seller has received. With an average approval rate of over 98%, the sellers represented in the sample had very positive feedback. The last set of variables measure comparison shopping information available from the ABE and Amazon sites. According to its website, ABE is the worlds largest online market price for books with over 110 million new and used books listed by 13,500 booksellers. Amazon, the third largest conventional bookseller in the United States, has a large online presence including both new and used books. In Table 1, the lot variables measure the number of books being sold on the given site that are the same as the book being auctioned on eBay. The mean for ABE lot was almost 29 books while the mean for Amazon lot was almost 77 books, about 2.6 times the average for ABE lot. As for the alternative e-prices, the ABE price is the lowest price for a given book on ABE; similarly the Amazon price is the from price on Amazon. The last two variables indicate the difference between the alternative e-prices and the minimum bids for each auction. The ABE price difference, calculated as the minimum bid minus the ABE price defined above, had a mean of 5.16 dollars. Sellers, on average, are setting the minimum bid 37% below the ABE alternative eprice. The Amazon price difference, the minimum bid minus the Amazon price, had a mean of 6.47 dollars. Again, sellers are setting the minimum bid below the alternative e-price, in this case, the minimum bid is on average 42% below the Amazon price. Clearly, sellers set their minimum bid well below both possible alternative e-prices.

388

J. Highfill, K.M. OBrien

Empirical Model Three different sets of regressions are specified. In the first set, the auction outcome, sold or not sold, is the dependent variable. In the second set, the auction process variable, bids, is the dependent variable. In the third set of regressions, the other auction outcome variable, final sale price, is investigated. Two final sale price specifications are investigated with one including the bids variable and the other omitting the bids variable. Except for the various treatments of bids, the predictions for the explanatory variables in all auction outcomes regressions are the same. Since the sold variable is binary, the first regression uses logit analysis. The first independent variable is the minimum bid or reserve price. A higher value should decrease the probability of an item being sold by reducing the range of reservation prices from which bid are drawn. Predictions for the buy-it-now option on the probability of a sale are ambiguous and depend on how high the buy-it-now price is set. A buy-it-now price set excessively high will decrease the probability of a sale by discouraging those bidders with relatively low reservations prices. On the other hand, a buy-it-now price set too low will increase the probability of a sale as bidders will quickly activate this option to end the auction. A weekend closing for an auction should increase the probability of a sale since weekends provide more opportunities to participate in online auctions. Increased fees for shipping and handling should decrease the probability of a sale since higher fess increase the total cost of a transaction. Conversely, all the method of payment variables (Paypal, money orders/ cashiers check and personal check) should increase the probability of a sale since all facilitate payment. A new or autographed book should be more desirable and so increase the probability of a sale. Any picture provides information and should increase the probability of a sale, but a stock picture may not increase the probability of a sale by the same magnitude as an actual picture. The effect of the four book category variables is ambiguous. Recall the default book category is textbooks. The last variables are the book lot and alternative e-price variables. The lot variables are ABE lot and Amazon lot, the number of books available online at ABE and Amazon respectively. Since these lot variables represent the number of alternative copies of an auctioned book, an increase in either should decrease the probability of a book being sold by auction. The ABE price difference and Amazon price difference variables are the minimum bid minus either the ABE low price or the Amazon low price. Recalling that the mean values for both of these price difference variables were negative, on average sellers set the minimum bid below the reference prices. Thus, if there is an increase in the price difference variable, the seller is increasing the minimum bid, making it closer to the alternative e-price. As the gap between the minimum bid and alternative price decreases, buyers should be less likely to buy the auctioned book and so the probability of a sale should decrease. Because there may be collinearity between the ABE and Amazon variables, the lot and price difference variables are estimated together in the same regression and then estimated again in separate regressions. The latter are used to determine if the effects of these variables differ in any significant manner. This strategy will be used for all the sets of regressions. The second set of regressions, where the number of bids is the dependent variable, are estimated using the Poisson model for count data. The Poisson model is best suited for discrete variables limited to small values such as the bid data in this

The Effect of Alternative e-Prices on eBay Book Auctions

389

sample. The independent variables for these regressions are the same as those used in the sale/no sale logit regression. The predicted signs for most of the variable coefficients are the same as for the logit regression except for the buy-it-now option which should definitely decrease the number bids since any use of this option allows a buyer to preempt the bidding process. For the key lot and price difference variables, the predictions in the bid regressions are the similar to those for the previous regressions. An increase in the number of alternatives for the book being auctioned should decrease the number of bids for a book. With an increase in either of the price difference variables bidding on the auctioned book should decrease, because the minimum bid is approaching (even surpassing) the alternative price. The third and last set of regressions, where the dependent variable is the final sales price, are estimated using a censored Tobit. In the sample, 99 books or 34% ended in no sale which implies that the minimum bid exceeded the willingness-to-pay for these auctions. To deal with these left-censored observations, a Tobit maximum likelihood estimation technique with variable cut-offs, the minimum bid, is used. Two sets of final sales price regressions are specified; the first set includes the number of bids while the second set omits them. Except for the bids variable, the independent variables are the same as in the earlier estimation equations. The predictions for the signs of the coefficients are similar to those in the earlier regressions. The effect of a higher minimum bid should be positive on the final sales price since a higher minimum bid should presumably reflect an item with a higher value. The exception would be the situation where a seller sets an excessive minimum bid which discourages entry of bidders. The effect of the buy-it-now variable should be negative. If the buy-it-now price is set excessively low, a buyer may quickly use this option, preempt entry by other buyers and so decrease the final sales price. Conversely, if the buy-it-now price is set too high, this will discourage bidding and the book will remain unsold. For the key lot and price difference variables, an increase in the number of alternatives for the auctioned book available should decrease the willingness-to-pay for a book and so decrease the final sales price. An increase in either of the price difference variables means the gap between the minimum bid and alternative e-price is decreasing. As the minimum bid approaches or surpasses the alternative price, the buyers willingness-to-pay for a book should decrease and so decrease the final sales price. In the first set of final sale price regressions where the number of bids is an independent variable, an increase in the number of bids will increase the final sales price because more bids increase the range of reservation prices from which bids are drawn. In the second set of final sale price regressions, the bids variable is not included. Though the signs for the independent variables should be the same, the interpretation of the coefficients is somewhat different. These coefficients represent the total effect of the independent variables on the final sales price including the variables indirect effect via its influence on the number of bidders. Another way to interpret these coefficients is that they measure the effect of the independent variables on the bidders willingness-to-pay.

Empirical Results Table 2 contains the results of the logit regressions where the dependent variable was whether a book sold or not. Although most of the variables had the correct sign in

390 Table 2 Sold or not sold logit regressions Independent Variable Constant Minimum bid Buy-it-now Weekend closing Shipping and handling Paypal Money order/Cashiers check Personal check First edition New Autographed Actual picture Stock picture Antique Childrens Fiction Nonfiction Seller feedback ABE lot ABE price difference Amazon lot Amazon price difference %-Correct N t-values are in parentheses. a ,
b

J. Highfill, K.M. OBrien

(1) 4.68 (1.003) 0.14 (1.009) 2.14c (4.396) 0.05 (.161) 0.08 (1.215) 0.03 (.025) 0.29 (.788) 0.01 (.047) 0.30 (.929) 0.80b (2.013) 0.10 (.123) 0.008 (.012) 0.14 (.204) 0.37 (.574) 1.08b (2.007) 0.27 (.486) 0.24 (.459) 0.02 (.653) 0.0004 (.193) 0.004 (.601) 0.001 (1.512) 0.01a (1.923) 73.63 292 and
c

(2) 5.28 (1.238) 0.002 (.223) 2.28c (4.704) 0.01 (.050) 0.06 (.1.010) 0.23 (.191) 0.26 (.734) 0.01 (.035) 0.29 (.903) 0.81b (2.063) 0.11 (.148) 0.04 (.071) 0.31 (.455) 0.01 (.028) 1.42c (2.721) 0.79 (1.519) 0.61 (1.224) 0.02 (.727) 0.001 (.676) 0.007 1.037) 74.65 292 4.76 (1.011) 0.01 (.853)

(3)

2.15c (4.439) 0.05 (.168) 0.09 (1.298) 0.01 (.011) 0.29 (.794) 0.01 (.032) 0.29 (.897) 0.79b (1.985) 0.01 (.022) 0.01 (.019) 0.17 (.247) 0.37 (.596) 1.11b (2.073) 0.33 (.599) 0.26 (.512) 0.02 (.647) 0.001 (1.586) 0.02b (2.003) 72.60 292

denote significance at the 10%, 5%, and 1%levels of significance.

the three regressions, few of the coefficients were significant. Of the latter, a new book has a positive effect, and a childrens book a negative effect compared to a textbook. A priori the effect of the buy-it-now option was ambiguous but in all three regressions the coefficient was negative and significant. Of the key lot and price difference variables, all had the predicted signs but only the Amazon price was significant. In regressions (1) and (3) a decrease in the gap between the minimum bid and the Amazon price decreased the probability of a book being sold. These results suggest that the Amazon low price is the alternative e-price most influencing buyer behavior. Table 3 has the results for the Poisson regressions where the number of bids was the dependent variable. The results for the three regressions were very consistent and most of the variables, where significant, had the expected effects. A higher minimum bid had a negative effect but was insignificant. As for variables with significant predicted effects, the buy-it-now option had a negative effect on the number of bids in all three regressions and the effect was relatively large. The Paypal option had increased the number of bids in all three regressions as did the personal check option

The Effect of Alternative e-Prices on eBay Book Auctions Table 3 Bid poisson regressions Independent Variable Constant Minimum bid Buy-it-now Weekend closing Shipping and handling Paypal Money order/Cashiers check Personal check First edition New book Autographed Actual picture Stock picture Antique Childrens Fiction Nonfiction Seller feedback ABE lot ABE price difference Amazon lot Amazon price difference Log-Likelihood N (1) 1.00a (1.762) 0.0006 (.205) 2.31c (6.450) 0.006 (.071) 0.04c (3.229) 2.23c (5.001) 0.08 (.787) 0.48c (4.995) 0.01 (.185) 0.44c (5.180) 0.30 (1.636) 0.19 (.979) 0.06 (.328) 0.67c (4.436) 0.98c (6.967) 1.17 (7.637)
c c

391

(2) 0.03 (.074) 0.004 (1.577) 2.33c (6.507) 0.03 (.415) 0.06c (4.511) 1.29c (3.821) 0.10 (1.067) 0.42c (4.482) 0.009 (.103) 0.44c (5.272) 0.57 (3.298) 0.17 (.928) 0.05 (.262) 0.72c (4.790) 1.03c (7.351) 1.15 (7.725)
c c c

(3) 0.65 (1.260) 0.0006 (.212) 2.38c (6.666) 0.10 (1.120) 0.03b (2.601) 1.91c (4.891) 0.04 (.421) 0.55c (5.934) 0.03 (.381) 0.43c (5.071) 0.11 (.610) 0.20 (1.040) 0.05 (.280) 0.50c (3.558) .98c (6.977) 1.24c (8.498) 0.61c (5.549) 0.002 (1.407) 0.0002 (.754) .005c (7.035) 800.387 292

0.64 (5.758) 0.003 (1.546) 0.002b (1.969) .002c (8.907) 0.0004 (1.390) .004c (4.943) 767.730 292

0.65 (5.903) 0.003 (1.775)

a

0.002b (2.314) .002c (10.103) 779.932 292

t-values are in parentheses. a , b and c denote significance at the 10%, 5%, and 1% levels of significance.

although the effect was not as large. An autograph increased the number of bids for a book but the effect was significant in only one of the regressions. Significant results, contrary to prediction, were shipping and handling fees which have a positive effect on the number of bids in all three regressions. Possibly higher shipping and handling fees increased bids because buyers believed their item would be more carefully processed. Seller feedback was unexpectedly negative in all the regressions with the results being significant in one regression. This result may reflect the lack of variance in this variable since almost all the sellers had high feedback ratings. Finally, the book category variables were significant and negative in all the regressions. This implies the default category, textbooks, were more popular than the other book categories in terms of bidding by buyers. Of the remaining variables, the ABE lot variable had, as expected, a negative effect on the number of bids. Conversely, the effect of the Amazon lot variable was positive but it was insignificant. These results imply buyers perceived ABE as a better alternative source for the auctioned books compared to Amazon. The price difference variables for both ABE and Amazon were, according to predictions,

392

J. Highfill, K.M. OBrien

negative in all cases. Thus, as the minimum bid approached the alternative e-price, whether the ABE or Amazon price, buyers decreased their number of bids. Although the effect was modest, this result demonstrates that bidders were responding to the alternative prices. It should be noted that the effect for the Amazon price was somewhat larger than the ABE price effect. This may indicate a greater role for the Amazon price for comparison shopping as compared to the ABE price. Table 4 shows the censored Tobit regressions with the final sales price as the dependent variable when bids are included. Minimum bids, as expected, had a positive, significant effect on the final sales prices in all three regressions as did the number of bids and effect was relatively large. Two of the payment methods had significant effects but were of opposite signs. As expected, the use of Paypal had a positive effect on the final sales price and the effect was large. Contrary to expectations, use of money orders or cashiers checks had a negative effect, possibly

Table 4 Final sales price tobit regressions with bids Independent Variable Constant Minimum bid Bids Buy-it-now Weekend closing Shipping and handling Paypal Money order/Cashiers check Personal check First edition New book Autographed Actual picture Stock picture Antique Childrens Fiction Nonfiction Seller feedback ABE lot ABE price difference Amazon lot Amazon price difference Log-Likelihood N t-values are in parentheses. a ,
b

(1) 71.0c (2.747) 1.72 (10.924) 5.03 (11.517) 170.97 (.133) 2.96 (.608) 0.48 (.547) 32.84b (2.000) 12.48b (2.348) 5.95 (1.128) 8.77a (1.881) 1.92 (.391) 8.99 (.951) 33.20b (2.493) 24.48 (1.794) 15.50 (1.905) 6.35 (.771) 10.74 (1.363) 5.72 (.946) 0.21a (1.906) 0.10 (1.449) 0.01 (.350) 0.01 (.533) 0.05 (1.030) 506.514 292 and
c a b c c

(2) 65.3c (2.630) 1.69 (11.157) 5.03 (11.557) 172.47 (.134) 2.45 (.505) 0.31 (.368) 26.73a (1.803) 11.90b (2.255) 4.93 (.948) 8.46a (1.821) 1.85 (.378) 11.19 (1.256) 34.01b (2.549) 24.98 (1.825) 14.90 (1.838) 7.09 (.864) 9.79 (1.295) 5.42 (.900) 0.21a (1.929) 0.12a (1.839) 0.01 (.676) 507.282 292
a a c c

(3) 69.6c (2.666) 1.73c (10.916) 5.12c (12.367) 170.47 (.132) 2.89 (.593) 0.57 (.640) 32.86a (1.98) 13.10b (2.456) 7.30 (1.397) 8.71a (1.870) 1.47 (.299) 5.68 (.617) 32.49b (2.406) 23.50a (1.698) 13.45a (1.727) 6.89 (.828) 6.85 (.921) 5.67 (.938) 0.22b (1.997) 0.01 (.967) 0.06 (1.442) 507.884 292

denote significance at the 10%, 5%, and % levels of significance.

The Effect of Alternative e-Prices on eBay Book Auctions

393

being associated with lower value books. A first edition, an actual picture, and a stock picture all had a positive, significant effect in all the regressions and the effects were quite large. Compared to textbooks, an antique had a significantly higher price. None of the other book categories were significant. As above, a higher seller feedback score had a negative, significant effect on the final sales price. Contrary to the earlier regression, only one of the lot or reference price variables significantly affected the final sale price. As expected, the ABE lot variable significantly decreased the final sale price with the size of the effect being modest. The ABE lot variable was significant only in the specification where it was employed without the Amazon variables. The implication is that when bids are included in the specification of final sale prices, no comparative shopping effects occur. Table 5 contains the final sales price regressions without a bids variable. Again, a censored Tobit regression technique was used. The coefficients of the independent variables represent the total effect on the final sales price including the variables indirect effect via its influence on the number of bidders, or the effect of the variables on the bidders willingness-to-pay. The results for minimum bid were very similar to those in Table 4 where the minimum bid had a positive, significant effect. The Paypal coefficients in Table 5 were positive and significant in all three regressions as they were in Table 4, but its effect in Table 5 is much larger than in Table 4. Unlike Table 4, the money order/cashiers check variable was insignificant but the personal check variable had a positive, significant effect. Also, unlike Table 4, a new book had positive, significant effect on the final sales price and the effect was relatively large. An autograph only had a significant effect in one of the specifications. Like Table 4, an actual picture significantly increased the final sales price but a stock picture had no effect. Of the book category dummies, only the childrens category was significant earning lower prices compared to textbooks. Again, contrary to predictions, enhanced seller feedback significantly decreased the final sales price. Considering the lot variables, the ABE lot variable in the second regression, as in Table 4, significantly decreased the final sales price. This was the only specification where a lot variable was significant. Together, the results from Tables 4 and 5 show that only ABE lot size affects the final sales price suggesting that ABE, not Amazon, appears to be the fixed-price site of choice for eBay users. For the price difference variables in the first column, both the ABE and Amazon variables significantly decreased the final sales price. When included by themselves, the price variables also had a significant, negative effect. The coefficients for the price variables in all three regressions were similar in magnitude. Thus, without bids being included, as the minimum bid approached the alternative e-price, the final sales price for a book decreased. Another interpretation is that as the gap between the minimum bid and the alternative price lessened, the bidders willingness-to-pay for a book decreased. A further interpretation can be made. Recall that when bids were included as an independent variable, neither price variable had any effect. When the bids variable was excluded, both e-price variables had a significant, negative effect in all cases. Thus, we can infer that as the minimum bid approached the alternative e-price, whether the ABE or Amazon price, buyers decreased their number of bids.

394 Table 5 Final sales price tobit regressions without bids Independent Variable Constant Minimum bid Bids Buy-it-now Weekend closing Shipping and handling Paypal Money order/Cashiers check Personal check First edition New book Autographed Actual picture Stock picture Antique Childrens Fiction Nonfiction Seller feedback ABE lot ABE price difference Amazon lot Amazon price difference Log-Likelihood N 225.61 (.122) 3.08 (.480) 0.65 (.546) 73.83 (3.122) 9.23 (1.313) 15.67b (2.299) 9.31 (1.495) 12.87a (1.952) 13.93 (1.068) 36.52 (2.266) 25.42 (1.549) 0.29 (.028) 25.01 (2.435)
b b c

J. Highfill, K.M. OBrien

(1) 91.1c (2.577) 1.71 (7.868)

c

(2) 76.36b (2.281) 1.62 (7.724) 226.90 (.123) 2.57 (.401) 1.12 (.976) 59.50 (2.834) 8.84 (1.262) 14.08b (2.089) 8.52 (1.370) 13.22b (2.006) 20.45a (1.652) 37.02b (2.293) 25.60 (1.555) 1.87 (.175) 7.09 (.864) 15.10 (1.534) 9.96 (1.250) 0.30a (1.858) 0.15 (1.848)
a c c

(3) 88.60b (2.390) 1.67c (7.291) 235.68 (.120) 4.27 (.628) 0.40 (.320) 71.27c (2.948) 10.16 (1.363) 19.05c (2.667) 8.40 (1.279) 12.60a (1.804) 7.75 (.575) 37.41b (2.186) 25.40 (1.458) 0.75 (.069) 26.77b (2.443) 22.57b (2.184) 9.12 (1.074) 0.31a (1.834) 0.002 (.097) 0.21c (3.044) 578.252 292

16.11 (1.574) 9.72 (1.216) 0.29a (1.824) 0.13 (1.606) -0.12c (3.343) 0.007 (.290) 0.11a (1.650) 507.962 292

0.14c (4.014) 572.346 292

t-values are in parentheses. a , b and c denote significance at the 10%, 5%, and 1% levels of significance.

Conclusion Addressing questions about how the internet has affected the every day lives of consumers is perhaps one of the most important research agendas of the present time for economists. The present paper attempts to address one small piece of that agenda, using data on one good, books, gathered from an auction site, eBay, and two fixed-price sites, ABE and Amazon. Our evidence suggests that both sellers and buyers on eBay make use of the information from the other sites, sellers by setting their minimum prices below the prices available on the alternative sites, buyers by basing their bidding behavior on how the seller has set the minimum price compared to the alternative e-price. In terms of future research, two other comparison shopping issues could be investigated. One involves big box stores which also operate online sales sites as well as brick and mortar stores. The effect of the online fixed prices on eBay auctions could be examined. An interesting aspect of the analysis would be to

The Effect of Alternative e-Prices on eBay Book Auctions

395

ascertain the impact of the source of the items being auctioned on eBay which might be either pirated or stolen. A second project could explore the effect of online ticket sales sites on eBay ticket price auctions. The analysis could determine if ticket prices reflect the sales of unsold tickets or are the result of scalping.

References
Adams, C. P. (2007). Estimating demand from eBay prices. International Journal of Industrial Organization, 25(6), 121332. Amyx, D. A., & Leuhling, M. S. (2006). Winners curse and parallel sales channels-online auctions linked within e-tail websites. Information & Management, 43(8), 919927. Andrews, T., & Benzing, C. (2007). The determinants of price in internet auctions of used cars. Atlantic Economic Journal, 35(1), 4347. Cheema, A. (2008). Surcharges and seller reputation. Journal of Consumer Research, 35(1), 16777. Dholakia, U., & Simonson, I. (2005). The effect of explicit reference points on consumer choice and online bidding behavior. Marketing Science, 24(2), 20617. Hardesty, D. M., & Suter, T. A. (2005). E-tail and retail reference price effects. Journal of Product & Brand Management, 14(2), 12936. Highfill, J., & OBrien, K. (2007). Bidding and prices for online art auctions: Sofa art or investment. Journal of Cultural Economics, 31(4), 27992. Highfill, J., & OBrien, K. (2009). The determinants of sales on ebay: The case of baseball cards. Applied Economics Letters, forthcoming. Kamins, M. A., Dreze, X., & Folkes, V. S. (2004). Effects of seller-supplied prices on buyers product evaluations: Reference prices in an internet auction context. Journal of Consumer Research, 30(4), 62228. Lucking-Reiley, D., Bryand, D., Prasad, N., & Reeves, D. (2007). Pennies from eBay: The determinants of price in online auctions. Journal of Industrial Economics, 55(2), 22333. Rosenkranz, S., & Schmitz, P. W. (2007). Reserve prices in auctions as reference points. Economic Journal, 117(520), 63753. Roth, A. E., & Ockenfels, A. (2002). Last-minute bidding and the rules for ending second-price auctions: Evidence for eBay and Amazon auctions on the internet. American Economic Review, 92(4), 1093 1103. Shunda, N. (2007). Auctions with a buy price: The case of reference-dependent preferences. University of Connecticut, Department of Economics, Working papers. Trautmann, S. T., & Traxler, C. (2008). Reserve prices as reference points-evidence from auctions for football players. hattrick.org. Wintr, L. (2008). Some evidence on late bidding in eBay auctions. Economic Inquiry, 46(3), 36979.