Asymmetric Information, Adverse Selection and Online Disclosure: The Case of eBay Motors

Since Akerlof (1970), economists have understood the adverse selection problem that information asymmetries can create in used goods markets. The remarkable growth in online used goods auctions thus poses a puzzle. Part of the solution is that sellers voluntarily disclose their private information on the auction web page. This defines a precise contract -- to deliver the car shown for the closing price -- which helps protect the buyer from adverse selection. I test this theory using data from eBay Motors, finding that online disclosures are important price determinants, and that disclosure costs impact both the level of disclosure and prices. (JEL D44, D82, L81)

An Examination of Consumer Behavior on eBay Motors

With annual sales of $7.5 billion, eBay Motors has become one of the most important online marketplaces. For several years, researchers have used eBay transactions as a mechanism for examining consumer behavior and economic relationships in Internet auctions. As automobiles have emerged as the leading product category on eBay, research focused specifically on eBay Motors is an important extension to this line of research. This study builds on past research by examining research questions using a sample of 126 eBay Motors exchanges along with benchmark pricing data from Kelley Blue Book. The findings of the study suggest that, within selected data ranges, such factors as seller feedback ratings, number of pictures in item description, and seller type (dealer vs. individual) may affect the percentage of retail value that sellers are able to earn in eBay Motors auctions.

An Examination of Consumer Behavior on eBay Motors

With annual sales of $7.5 billion, eBay Motors has become one of the most important online marketplaces. For several years, researchers have used eBay transactions as a mechanism for examining consumer behavior and economic relationships in Internet auctions. As automobiles have emerged as the leading product category on eBay, research focused specifically on eBay Motors is an important extension to this line of research. This study builds on past research by examining research questions using a sample of 126 eBay Motors exchanges along with benchmark pricing data from Kelley Blue Book. The findings of the study suggest that, within selected data ranges, such factors as seller feedback ratings, number of pictures in item description, and seller type (dealer vs. individual) may affect the percentage of retail value that sellers are able to earn in eBay Motors auctions.