Managing Online Auctions: Current Business and Research Issues
Management Science
Are online auction markets efficient? An empirical study of market liquidity and abnormal returns
Decision Support Systems
The effects of shilling on final bid prices in online auctions
Electronic Commerce Research and Applications
Bid evaluation behavior in online procurement auctions involving technical and business experts
Electronic Commerce Research and Applications
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We study the impact of dynamic environment of eBay auctions on bidding behavior. Due to high-speed Internet and practically costless search possibilities, bidding behavior is no longer a function of characteristics of a single auction but depends on auctions running simultaneously, completed auctions, available Buy-It-Now prices as well as various outside options. We study how this dynamic market affects a bidder's choice of participating in an auction or leaving eBay for an outside alternative. We analyze Texas Instruments (TI-83) Graphing Calculator auctions presented on eBay. We estimate a random-effects probit model to study bidders' probability of staying in eBay, while controlling for unobservable individual-specific heterogeneity. Our main result shows that Market Tightness - the ratio of bidders to sellers - has a negative and significant effect on bidders' decision to remain in eBay. Moreover, variables containing information from other eBay auctions significantly affect bidders' participation decision, thus emphasizing the importance of the dynamic, multi-auction environment in eBay marketplace for potential buyers.