Consumer Surplus in Online Auctions

Despite the growing research interest in Internet auctions, particularly those on eBay, little is known about the quantifiable consumer welfare accrued from such mechanisms. Using an ongoing novel field experiment, we collect and examine a unique dataset to empirically quantify and understand determinants of consumer surplus in eBay auctions. Our analysis, based on a sample of 5157 eBay auctions, indicates that the median surplus level per auction on eBay auctions is $3.53, which roughly translates to $1.47 billion in accrued consumer surplus for the year 2003 alone. We find that consumer surplus is significantly different across currencies and item categories, negatively influenced by seller experience, auction duration and competition, and positively influenced by bidder experience, bidder aggressiveness and item price.