Show Me The Goods

Consumers using online auction websites face the challenge of appraising products at a distance. Sellers and buyers in online auctions navigate this challenge by displaying and evaluating various cues, a critical one being use of photographs. Warranting theory predicts that cues less subject to control and manipulation by the presenter will be more influential in impression formation. Therefore, user-generated photographs which display the actual item should be more effective in generating successful auctions, more bidders, more bids, and higher prices, compared with stock photographs. A field experiment tested this prediction by systematically manipulating photographs for eBay auctions. User-generated photographs were found to have a positive effect on likelihood of selling and the number of auction bidders. Findings indicate that attracting more bidders is a possible mechanism for higher sale prices and also show a moderating role of bidder experience.

Bidding Behaviors in eBay Auctions: Secret Reservation Price and Endogenous Entry

This paper analyzes the secret reservation price in eBay auctions. Under the assumptions of secret and public reservation price, the bidders choose the optimal bidding function and the seller selects equilibrium reservation price. This model argues that the choice of secret reservation price is rational for the seller, as they can generate higher revenue in certain conditions. It predicts that, under endogenous entry, secret reservation price leads to higher revenue since it attracts more bidders to the auction. This effect is more noticeable for luxury goods. However, secret and public reservation prices generate identical revenue for the seller if entry is exogenous. Furthermore, the results are supported by numerous recent empirical works.