eAuctions: Impact of Network Externalities on Sellers' Behavior

Virtual markets are becoming more and more accepted by buyers and sellers. The success of eBay has prompted other companies to offer auction sites to lure buyers and sellers. The new companies usually offer lower rates to attract virtual sellers thereby multiplying the number of options for virtual buyers. This project presents an exploratory study of the final value available to sellers on two different auction sites, eBay and Yahoo! Auctions. Specifically, the study aims at finding whether or not the leading Internet auction site provides a better opportunity for sellers to extract more consumer surplus by selling goods for higher prices. The statistical analysis shows that in the leading site (eBay) the number of bids placed is greater, the average final price offered is higher, and the average final value is higher than in the competing site (Yahoo!). These findings are important to virtual sellers and buyers and to new organizations promoting virtual markets.