Working Paper: NBER ID: w19021
Authors: Liran Einav; Chiara Farronato; Jonathan D. Levin; Neel Sundaresan
Abstract: Consumer auctions were very popular in the early days of internet commerce, but today online sellers mostly use posted prices. Data from eBay shows that compositional shifts in the items being sold, or the sellers offering these items, cannot account for this evolution. Instead, the returns to sellers using auctions have diminished. We develop a model to distinguish two hypotheses: a shift in buyer demand away from auctions, and general narrowing of seller margins that favors posted prices. Our estimates suggest that the former is more important. We also provide evidence on where auctions still are used, and on why some sellers may continue to use both auctions and posted prices.
Keywords: Internet Auctions; Online Markets; Sales Mechanisms; Consumer Behavior; eBay
JEL Codes: D02; D43; D44; D47; D82; L13; L86
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| decline in internet auctions (D44) | decrease in relative demand for auctions (D44) |
| decrease in relative demand for auctions (D44) | shift toward convenience and posted pricing (D49) |
| shift toward convenience and posted pricing (D49) | decreased attractiveness of auctions (D44) |
| decline in auction demand (D44) | shift in seller incentives (D43) |
| increased retail competition (L81) | shift toward posted prices (P22) |
| relative fall in auction demand (D44) | move toward posted prices (D41) |
| auction discount widening (D44) | decline in seller profitability associated with auctions (D44) |