Network Effects and the Evolution of Internet Auctions

Network Effects and the Evolution of Internet Auctions

S. Park (Seoul National University, Republic of Korea)
Copyright: © 2007 |Pages: 17
DOI: 10.4018/978-1-59904-156-8.ch005

Abstract

Based on the weekly data of listings and Web site usage of eBay and Yahoo!Auctions, as well as fee schedules and available auction mechanisms, this chapter provides empirical support of the network effect in Internet auctions: A seller’s expected auction revenue increases with page views per listing on one hand and increased listings raise page views per listing on the other hand. The existence of the network effect between Web site usage and listings explains the first mover’s advantage and the dominance of eBay even with higher fees in the Internet auctions market. Our empirical findings also highlight unique features of Internet auctions, especially in the entry behavior of potential bidders into specific auctions, inviting more theoretical studies of the market microstructure of Internet auctions.

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