Buy-It-Now prices in eBay auctions – The Field in the Lab 1

1The authors thank Charles Bellemare for his valuable suggestions and comments. We are grateful to the participants of the GEW conference in Magdeburg, the ESA European Meeting, the meeting of the European Economic Association and the Eco-nomics seminar at Carleton University for their comments. Financial support by the Deutsche Forschungsgemeinschaft, SFB Transregio 15, “Governance and Efficiency of Economic Systems ” is gratefully acknowledged. Electronic commerce has grown extraordinarily over the years, with online auc-tions being extremely successful forms of trade. Those auctions come in a variety of different formats, such as the Buy-It-Now auction format on eBay, that allows sellers to post prices at which buyers can purchase a good prior to the auction. Even though, buyer behavior is well studied in Buy-It-Now auc-tions, as to this point little is known about how sellers set Buy-It-Now prices. We investigate into this question by analyzing seller behavior in Buy-It-Now auctions. More precisely, we combine the use of a real online auction market (the eBay platform and eBay traders) with the techniques of lab experiments. We find a striking link between the information about agents provided by the eBay market institution and their behavior. Information about buyers is corre-lated with their deviation from true value bidding. Sellers respond strategically to this information when deciding on their Buy-It-Now prices. Thus, our results highlight potential economic consequences of information publicly available in (online) market institutions