The Effect of Competition on eBay

41 Pages Posted: 21 May 2014 Last revised: 13 Jun 2015

See all articles by Peter Newberry

Peter Newberry

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics

Date Written: January 29, 2015

Abstract

I examine the effect of competition on eBay Motors. I specify a simple model of auction choice and show that the expected transaction price falls with an increase in the number of competitors. I then test for this effect using data from 5,500 auctions for Chevrolet Corvettes. To address potential endogeneity of the level of competition, I introduce an instrument which takes advantage of the unique features of eBay. Results indicate that an additional competitor leads to a 6% reduction in the final transacted price ($960 for the average car). Further, I provide evidence that this effect is due to the thinning of the bidder market rather than dynamic bidding.

Keywords: Auctions, eBay, Simultaneous Auctions, Auction Choice, Endogenous Entry

JEL Classification: L11, L13, D44

Suggested Citation

Newberry, Peter, The Effect of Competition on eBay (January 29, 2015). International Journal of Industrial Organization, Vol. 40, 2015, Available at SSRN: https://ssrn.com/abstract=2439379 or http://dx.doi.org/10.2139/ssrn.2439379

Peter Newberry (Contact Author)

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )

Athens, GA 30602-6254
United States

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