CONSUMER BEHAVIOR IN ONLINE AUCTIONS:AN EXAMINATION OF PARTITIONED PRICES ON EBAY

By: Clark, John M.; Ward, Sidne G.
Source: Journal of Marketing Theory & Practice, Winter2008, Vol. 16 Issue 1, p57-66

Summary of the article:

Nowadays people prefer to purchase things from online sites,particularly auction sites.As the number of online auction transactions continues to rise,platform providers need to understand the effects of the online auction environment on consumer behavior to provide the most efficient and customer-friendly market method.It is also important to ensure that transactions occur at an encouraging price.E bay is the of the most successful auction sites.John M. Clark and Sidne G. Ward determine the effects of partitioned prices -that is, separate item costs and shipping charges on the winning bids-submitted by consumers on this site.The present study focuses on the collectibles market and identifies a large number of auctions involving homogeneous items,specifically collects data on auctions involving the base-level "Charizard" card from the Pokemon game set.E Bay allows the searching of closed auctions for two weeks after the auction has ended.Any auction with the term Charizard in the title is examined.Data from 218 auctions are included in the final analyses.Different levels of stated shipping costs,range from $0.55 to $4.20,are likely to differentially attract buyers' attention.Such as the earlier results,the most important finding is that consumers,even exprienced ones,do not fully attend to total costs;ignore the less-salient shipping costs when bidding.One potential explanation for the lack of attention to shipping costs is the relatively small amount of the costs.If consumers are completely insensitive to price,they would purchase items from dealers at fixed,higher prices on eBay or elsewhere.This behavior is particularly striking in an environment where sellers set variable shipping costs.Experienced sellers may gain an advantage of this situation by following a bait-and-switch-type strategy that uses an advertised low shipping cost, but provides the buyer with a higher cost and higher security option after the auction has concluded.Consumers wishing to minimize prices paid need to consider the total cost of items on which they bid.Sellers who wish to maximize revenue will carefully set shipping and handling as well as other ancillary costs.Managers of auction Web sites should understand the effects of the design of auction support mechanisms, such as allowing sellers to set their own shipping prices, in order to maximize commission revenues.

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