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Buyer behavior under the Best Offer mechanism: A theoretical model and empirical evidence from eBay Motors

Ching-I Huang, Jong-Rong Chen () and Chiu-Yu Lee

Journal of Economic Behavior & Organization, 2013, vol. 94, issue C, 11-33

Abstract: We use data from eBay Best Offer listings to analyze haggling over prices in transactions with one seller and a series of potential buyers for a limited-supply product. We characterize this transaction mechanism as a sequential-move game to investigate buyer behavior. Our model suggests that a buyer's offer price increases in relations to the number of buyers who have previously made an offer on the item and the Buy-It-Now price chosen by the seller. On the other hand, the offer price decreases for items which have been listed on eBay for a longer period of time. We empirically test our theoretical predictions using data on the sales of Toyota Camry cars on eBay Motors. The empirical evidence is consistent with our model.

Keywords: EBay; Best Offer; Haggling; E-commerce (search for similar items in EconPapers)
JEL-codes: C72 D49 L81 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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DOI: 10.1016/j.jebo.2013.07.003

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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