A Procedure to Set Prices and Select Inventory in Thinly Traded Markets Using Data from eBay

Xinbo Hu and Paul J. Zak
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Xinbo Hu: Center for Neuroeconomics Studies, Claremont Graduate University, 160 E. 10th St., Claremont, CA 91711-6165, USA
Paul J. Zak: Center for Neuroeconomics Studies, Claremont Graduate University, 160 E. 10th St., Claremont, CA 91711-6165, USA

JRFM, 2022, vol. 15, issue 7, 1-8

Abstract: Prices respond to equate supply and demand. However, price-setting in low-volume or “thin” markets is a challenge as is determining which items to carry. We present an algorithm that takes into account a store’s fixed costs, the cost of goods sold, prices, and listing duration to determine the portfolio of items to maximize profits. Prices can then be assigned as a mark-up over cost. The usefulness of this approach is demonstrated by applying it to a store on eBay in which the seller needs to meet a profit threshold. The findings identify how sellers of unusual items can effectively determine which items to list and how to set price to reach profit goals.

Keywords: pricing; market volume; portfolio profitability; Poisson model (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
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