The Christian Science Monitor:
In the 12 years since eBay’s launch, the online auction house has established itself as a one-stop shop for all things rare, kitschy, and collectible. But recently, a small group of economists have mined the site for a different prize: clues on how people spend their money.
Behind the millions of online auctions lies a virtual mini-economy flush with raw data. Harvesting this information has fed a new branch of economics, one that has proved again and again that shoppers act in unexpected ways.
Auctions can be hard to predict. Various items, be they ancient coins or next-generation electronics, can inspire odd behavior in buyers.
Ulrike Malmendier, an economist at the University of California at Berkeley, tracked auctions of common items – things readily available online or in stores but offered on eBay at a discount.
Tips for sellers
* Set low opening prices. When choosing between identical items, buyers seem to favor whichever auction has the most bids. The best way to grab early bids: Start with a cheap price. By the time a $1 DVD auction reaches $10, it will probably attract more newcomers than a DVD that started at $10.
• Don’t use secret reserves. A study of online auctions with and without hidden minimum prices showed that many buyers steer clear of items with a secret opening price. It’s like that old shopping joke, “If you have to ask how much it costs, you can’t afford it.”
• Stick with eBay. Research into various different auction websites revealed that eBay attracted almost 60 percent more bidders and 30 percent higher prices than identical items on Yahoo’s online auctions. Unable to keep up, Yahoo shut down its US auction site last month. But in countries where Yahoo is dominant, it enjoys similar results.
Photo by Scott Wallace.
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