Impact of Ending Rules in Online Auctions: the Case of Yahoo.com

Abstract

This paper examines the impact of sellers' choice of auction parameters on the level of their revenues using data from Yahoo.com's Playstation 2 system auctions. Our study specifically highlights the impact of the ending rule. We introduce a new variable called Winning Bid Ratio (WBR), and use it as a proxy for seller revenues. WBR is the ratio of the winning bid of an auction to the buy price offered by the seller. We find that choosing a high bid increment and including a shipping price decreases the WBR, Alternatively, lower number of bids and choosing a shorter auction length have a positive effect on the WBR. On the whole, the ending rule has a negative effect on the WBR, which is in accord with the theoretical predictions in the literature. However, we also find variations in the results for the effect of ending rule when we divide the data into two groups consisting of high and low-value auctions. (c) 2006 Published by Elsevier B.V.