Buy-it-Now Prices in eBay Auctions-The Field in the Lab

Abstract

This article is an experimental investigation on decision making in online auction markets. We focus on a widely used format, the Buy-It-Now auction on eBay, where sellers post prices at which buyers can purchase a good prior to an auction. Even though, buyer behavior is well studied in Buy-It-Now auctions, up to date little is known about the behavior of sellers. In this article, we study how sellers set Buy-It-Now prices by combining the use of a real online auction market (the eBay platform and eBay traders) with the techniques of lab experiments. We find a striking relation between information about agents provided by eBay and their behavior. Information about buyers is correlated with their deviation from true value bidding. Sellers respond strategically to this information when deciding on their Buy-It-Now prices. Our results highlight consequences of information publicly available in (online) markets and underline the crucial role of institutional details.