Pennies from eBay: The Determinants of Price in Online Auctions

This paper presents an exploratory analysis of the determinants of prices in online auctions for collectible one-cent coins at the eBay Web site. Our initial data set consists of over 20,000 auctions which took place during July and August 1999, and was collected automaticaaly by a "spider" program. From this large data set, we provide a number of descriptive statistics on the patterns in eBay data. We then perform detailed analysis on a restricted sample of 461 mint-condition Indian-head pennies, for which we were able to obtain accurate estimates of book value from a coin-collector's Web site. We have three major findings. First, a seller's feedback ratings, reported by other eBay users, have a measurable effect on her auction prices. Negative feedback ratings have a much greater effect that positive feedback ratings do. Second, minimum bids and reserve prices tend to have positive effects on the final auction price, though this finding does not take into account the fact that these instruments also decrease the probability of the auction resulting in an actual sale. Also, minimum bids appear only to have a significant effect when they are binding on a single bidder's bid, as predicted by economic theory. Third, when a seller chooses to have her auction last for a longer period of days, this significantly increases the auction price on average.