Friday, October 7, 2011
Posted by D. Daniel Sokol
Liran Einav (Stanford), Theresa Kuchler (Stanford), Jonathan Levin (Stanford) and Neel Sundaresan (EBay) have an interesting paper on Learning from Seller Experiments in Online Markets.
ABSTRACT: The internet has dramatically reduced the cost of varying prices, dis- plays and information provided to consumers, facilitating both active and passive experimentation. We document the prevalence of targeted pricing and auction design variation on eBay, and identify hundreds of thousands of experiments con- ducted by sellers across a wide array of retail products. We show how this type of data can be used to address questions about consumer behavior and market outcomes, and provide illustrative results on price dispersion, the frequency of over-bidding, the choice of reserve prices, buy nowoptions and other auction design parameters, and on consumer sensitivity to shipping fees. We argue that leveraging the experiments of market participants takes advantage of the scale and heterogeneity of online markets and can be a powerful approach for testing and measurement.