The following short paper underlines the impact of bidding behaviour, at eBay auctions, on the sales price. At the online auction portal eBay, bidders try to get the object of desire as cheap as possible with the highest evidence of quality and security, while sellers try to sell their product for the highest price possible. This paper elaborates on the impacts of minimum pricing, reserve prices, last minute bidding, sniping and seller’s reputation on the end prices of eBay auctions from seller’s and buyer’s perspective.
2. Different bidding behaviours
A minimum price, set by the seller, could have two different consequences on the outcome of the auction. Firstly, the potential bidder is deterred by the minimum price; secondly the minimum price ensures minimum revenue for the seller. On the one hand, a minimum price could harm some potential bidders, because there are just a few potential customers with demand at that price, scanning for cheap deals. On the other hand the minimum price, in case of enough demand, can lead to a higher end price. Due to that fact a balanced inaugural price leads to a higher end price in seller’s favour.
A reserve price has a similar effect as the minimum price, described above. It determines the lowest price the auction needs, to close a transaction between bidder and seller. In case a bidder sets a maximum bid above the reserve price the actual price is automatically set at this reserve fence. It acts as if an additional bidder would be involved in the auction.
If the item for sale is a scarce good and some potential bidders have the chance to get the desired good below the book price, a last minute bidding war can affect the sales price positively, but just in case there are more than one bidder or the reserve price is not reached yet. Moreover an auction participant, bidding in the last minute, is more likely to bid much higher to win the auction, than he or she would have to with plenty of time less. This again has a positive impact on end prices. A seller should schedule the end of the auction at the weekend on daytime, to ensure having several last minute bidders while at the same time lowering the risk of sniping. Research from Lucking-Reiley, D., Bryan, D., Prasad, N., & Reeves, D. (2006) showed that this has a positive impact on higher end prices.