Search and Choice in Online Consumer Auctions
University of Texas at Dallas - Naveen Jindal School of Management
Peter T. L. Popkowski Leszczyc
University of Alberta - Department of Marketing, Business Economics & Law
July 3, 2010
Marketing Science, Forthcoming
Price dispersion in simultaneous online auctions is a puzzle in light of the relatively low search costs required to find the lower price. Much of this price dispersion appears to be due to lack of switching by bidders between auctions, which in turn could be due to inertia related to search costs. We identify some of the influencing factors through a controlled field experiment involving pairs of simultaneous auctions. Keeping the sellers and the goods sold identical between two auctions, we vary auction design features between and within pairs including shipping cost, open reserve, secret reserve price and duration and provide bidders with incentives to search. We use a choice model which examines individual choice between pairs of simultaneous auctions. We find that within-pair price dispersion is substantial and that prices and auction choice by bidders are indeed related to search costs. We find strong inertia in auction choice and find that this effect significantly interacts with time left in the auction. While individuals do not always choose a lower priced auction, they are more likely to do so when search costs are low or search incentives are high.
Number of Pages in PDF File: 38
Keywords: Experimental Economics, Auctions, Field Experiments. Search
JEL Classification: C93, D12, D44, D83, M30, M39Accepted Paper Series
Date posted: August 3, 2010 ; Last revised: January 30, 2013
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