Abstract
Success of an online auction Web site is due to its appeal to bidders. Without bidders there would be no transactions. In a rising price auction, a higher opening price can act as a deterrent to bidder entry. The auctioneer can induce lower opening prices through a rising with respect to the opening prices insertion fee scheme. This will, in turn, increase bidder participation and, thus, increase the probability of an auction resulting in a sale. This work examines the impact the insertion fees have on the seller and buyer behavior on eBay using data generated by a natural experiment observed on eBay. The results demonstrate that the rising insertion fee structure of eBay induces sellers to lower their opening prices, which in turn, increases the bidding activity.
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