Topics in E-commerce
Paper Session
Friday, Jan. 6, 2017 7:30 PM – 9:30 PM
Hyatt Regency Chicago, Burnham
- Chair: Francesco Decarolis, Boston University and Einaudi Institute for Economics and Finance
A Theory of Discounts and Deadlines in Retail Search
Abstract
We present a new equilibrium search model where consumers face deadlines to obtain a retail product. Buyers initially search among discount opportunities, but are willing to pay more over time and eventually shift their search to full-price sellers. Even with homogeneous sellers and buyers, the model predicts equilibrium price dispersion and rationalizes the coexistence of both discount and non-discount sales mechanisms. We apply the model to online retail sales via auctions and posted prices; using data on one million listings for new-in-box items on eBay.com, we find robust evidence consistent with our model. As predicted, bidders increase their bids from one buying opportunity to the next, equilibrium price dispersion exists, and auctions and posted-price listings coexist. Fitting the model to the data, we find that the presence of the discount channel increases total welfare by 1.8% of the average retail price if intermediation is costly, but reduces welfare by 2.3% if intermediation is costless.Product Variety, Across Market Demand Heterogeneity, and the Value of Online Retail
Abstract
Online retail gives consumers access to an astonishing variety of products. However, the additional value created by this variety depends on the extent to which local retailers already satisfy local demand. To quantify the gains and account for local demand, we use detailed data from an online retailer and propose methodology to address a common issue in such data - sparsity of local sales due to sampling and a significant number of local zeros. Our estimates indicate products face substantial demand heterogeneity across markets; as a result, we find gains from online variety that are 30% lower than previous studies.Marketing Agencies and Collusive Bidding in Sponsored Search Auctions
Abstract
The transition of the advertisement market from traditional media to the internet has induced a proliferation of marketing agencies specialized in bidding in the auctions used to sell advertisement space on the web. We analyze how bidding delegation to a common marketing agency undermines both revenues and efficiency of the generalized second price auction, the format used by Google and Microsoft-Yahoo!. We characterize losses relative to the case of both full competition and agency-coordination under an alternative auction format (VCG mechanism). We propose a criterion to detect bid coordination and apply it to data from a major search engine.Discussant(s)
Fanyin Zheng
, Columbia University
Maher Said
, New York University
Ying Fan
, University of Michigan
Robert Porter
, Northwestern University
JEL Classifications
- C0 - General