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A Procedure to Set Prices and Select Inventory in Thinly Traded Markets Using Data from eBay

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  • Xinbo Hu

    (Center for Neuroeconomics Studies, Claremont Graduate University, 160 E. 10th St., Claremont, CA 91711-6165, USA)

  • Paul J. Zak

    (Center for Neuroeconomics Studies, Claremont Graduate University, 160 E. 10th St., Claremont, CA 91711-6165, USA)

Abstract

Prices respond to equate supply and demand. However, price-setting in low-volume or “thin” markets is a challenge as is determining which items to carry. We present an algorithm that takes into account a store’s fixed costs, the cost of goods sold, prices, and listing duration to determine the portfolio of items to maximize profits. Prices can then be assigned as a mark-up over cost. The usefulness of this approach is demonstrated by applying it to a store on eBay in which the seller needs to meet a profit threshold. The findings identify how sellers of unusual items can effectively determine which items to list and how to set price to reach profit goals.

Suggested Citation

  • Xinbo Hu & Paul J. Zak, 2022. "A Procedure to Set Prices and Select Inventory in Thinly Traded Markets Using Data from eBay," JRFM, MDPI, vol. 15(7), pages 1-8, July.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:7:p:297-:d:855993
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    References listed on IDEAS

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    2. Wedad Elmaghraby & P{i}nar Keskinocak, 2003. "Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions," Management Science, INFORMS, vol. 49(10), pages 1287-1309, October.
    3. Daron Acemoglu, 2007. "Equilibrium Bias of Technology," Econometrica, Econometric Society, vol. 75(5), pages 1371-1409, September.
    4. K. Sudhir, 2001. "Competitive Pricing Behavior in the US Auto Market: A Structural Analysis," Yale School of Management Working Papers ysm228, Yale School of Management.
    5. John R. Knight, 2002. "Listing Price, Time on Market, and Ultimate Selling Price: Causes and Effects of Listing Price Changes," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(2), pages 213-237.
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