NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Sales Mechanisms in Online Markets: What Happened to Internet Auctions?

Liran Einav, Chiara Farronato, Jonathan D. Levin, Neel Sundaresan

NBER Working Paper No. 19021
Issued in May 2013
NBER Program(s):IO, PR

Consumer auctions were very popular in the early days of internet commerce, but today online sellers mostly use posted prices. Data from eBay shows that compositional shifts in the items being sold, or the sellers offering these items, cannot account for this evolution. Instead, the returns to sellers using auctions have diminished. We develop a model to distinguish two hypotheses: a shift in buyer demand away from auctions, and general narrowing of seller margins that favors posted prices. Our estimates suggest that the former is more important. We also provide evidence on where auctions still are used, and on why some sellers may continue to use both auctions and posted prices.

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Document Object Identifier (DOI): 10.3386/w19021

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