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Buyer behavior under the Best Offer mechanism: A theoretical model and empirical evidence from eBay Motors

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  • Huang, Ching-I
  • Chen, Jong-Rong
  • Lee, Chiu-Yu

Abstract

We use data from eBay Best Offer listings to analyze haggling over prices in transactions with one seller and a series of potential buyers for a limited-supply product. We characterize this transaction mechanism as a sequential-move game to investigate buyer behavior. Our model suggests that a buyer's offer price increases in relations to the number of buyers who have previously made an offer on the item and the Buy-It-Now price chosen by the seller. On the other hand, the offer price decreases for items which have been listed on eBay for a longer period of time. We empirically test our theoretical predictions using data on the sales of Toyota Camry cars on eBay Motors. The empirical evidence is consistent with our model.

Suggested Citation

  • Huang, Ching-I & Chen, Jong-Rong & Lee, Chiu-Yu, 2013. "Buyer behavior under the Best Offer mechanism: A theoretical model and empirical evidence from eBay Motors," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 11-33.
    • Handle: RePEc:eee:jeborg:v:94:y:2013:i:c:p:11-33
    DOI: 10.1016/j.jebo.2013.07.003
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    References listed on IDEAS

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    Cited by:

    1. Chen, Kong-Pin & Lai, Hung-pin & Yu, Ya-Ting, 2018. "The seller's listing strategy in online auctions: Evidence from eBay," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 107-144.

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    More about this item

    Keywords

    EBay; Best Offer; Haggling; E-commerce;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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