Warranty, Seller Reputation, and Buyer Experience: Evidence from eBay Used Car Auctions

35 Pages Posted: 28 May 2020

See all articles by Xiaogang Che

Xiaogang Che

Durham University Business School

Hajime Katayama

Waseda University - School of Commerce

Peter Lee

J.P. Morgan Chase & Co.

Nan Shi

Shanghai Academy of Social Sciences (SASS)

Date Written: September‐December 2019

Abstract

Using data from the eBay car auction market, we test several predictions regarding warranties, seller reputation and buyer experience in the determination of the final price. We find that the presence of a warranty generates a price premium, but that its magnitude decreases when the seller has a more established reputation. Compared to private sellers, professional dealers, who are ‘repeated‐game players’ in the market, benefit less from a warranty and its substitutability for seller reputation is relatively small. In addition, a buyer with greater experience tends to pay less for a warranty or for a professional dealership.

Suggested Citation

Che, Xiaogang and Katayama, Hajime and Lee, Peter and Shi, Nan, Warranty, Seller Reputation, and Buyer Experience: Evidence from eBay Used Car Auctions (September‐December 2019). The Journal of Industrial Economics, Vol. 67, Issue 3-4, pp. 593-627, 2019, Available at SSRN: https://ssrn.com/abstract=3609431 or http://dx.doi.org/10.1111/joie.12213

Xiaogang Che (Contact Author)

Durham University Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Hajime Katayama

Waseda University - School of Commerce ( email )

School of Commerce, Waseda University
1-6-1 Nishi-Waseda Shinjyuku-ku
Tokyo, Tokyo 169 - 8050
Japan

Peter Lee

J.P. Morgan Chase & Co. ( email )

60 Wall St.
New York, NY 10260
United States

Nan Shi

Shanghai Academy of Social Sciences (SASS) ( email )

Shanghai
China

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