Value of Usage and Seller's Listing Behavior in Internet Auctions

TL;DR

This paper empirically analyzes how website usage and seller listing behavior influence auction outcomes on eBay and Yahoo!Auctions, revealing positive feedback effects and their implications for auction site strategies.

Contribution

It provides the first empirical evidence of the relationship between website usage, seller behavior, and auction revenues in internet auctions.

Findings

A 1% increase in website visitors raises expected revenue by approximately 0.022%.

A 1% increase in listings boosts website usage by about 2%.

Yahoo!Auctions has incentives to increase listings due to feedback effects.

Abstract

In this paper, we aim to empirically examine the value of website usage and sellers' listing behavior in the two leading Internet auctions sites, eBay and Yahoo!Auctions. The descriptive data analysis of the seller's equilibrium listing behavior indicates that a seller's higher expected auction revenue from eBay is correlated with a lager number of potential bidders measured by website usage per listing. Our estimation results, based on the logarithm specifications of sellers' expected auction revenues and potential bidders' website usage, show that in a median case, (i) 1 percent increase of the unique visitors (page views) per listed item induces 0.022 (0.007) percent increase of a seller's expected auction revenue; and (ii) 1 percent increase of sellers' listings induces 1.99 (4.74) percent increase of the unique visitors (page views). Since increased expected auction revenues will induce more listings, we can infer positive feedback effects between the number of listings and website usage. Consequently, Yahoo!Auctions, which has substantially less listings, has greater incentives to increase listings via these feedback effects which are reflected in its fee schedules.