Measuring Frictional Costs in E-Commerce: The Case of Name-Your-Own-Price Auctions

Frictional costs are defined as the disutility related to the conduct of an online transaction. Thus, frictional costs can accrue through the consumer‘s decision-making process prior to an online transaction, e.g., bidding in interactive pricing mechanisms like auctions. We present two models for the measurement of frictional costs in Name-Your-Own-Price auctions where these costs can either be measured through a discount factor or in absolute values. We compare the fit and estimation results of these models by analyzing bidding data from a German NYOP seller. Our results show that both models are equally parsimonious, explain a comparable fraction of variance and both models yield robust and reasonable parameter estimates.