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- W2496382570 abstract "Internet markets are usually under the command of a market intermediary that charges fees for its services. Differences in quality across items being sold allow the market intermediary to employ lucrative nonlinear pricing strategies and to offer different levels of service. For several years now, eBay has been using a nonlinear pricing policy that offers sellers the opportunity of having their items listed first when buyers search for specific products in return for an additional fee. A similar pricing strategy is also used in other online markets like Overstock.com and ArtByUs.com, and is also employed by search engines when sponsored links are displayed first. In this paper we analyze this topic from a theoretical and empirical perspective. Intuitively, potential buyers are more likely to examine items listed first and sellers of high quality items are more likely to pay an extra fee in order to have preferential access to buyers. In the theoretical section of the paper we analyze the optimal pricing policy of the market intermediary in a market with heterogeneous goods. In the empirical sections of the paper we analyze a unique panel of approximately 2,200 art auctions from artists who sell their own work through eBay. We use our data to quantify the overall impact of this pricing policy on the revenues of the sellers and the market intermediary. As expected, this pricing policy creates a selection effect by which sellers of the most valuable paintings are willing to pay an extra fee in order to gain access to a large pool of potential buyers. Our results also indicate that the pricing policy implemented by eBay increases revenues significantly for sellers and for the market intermediary when compared with a single-price policy and acts as a coordination mechanism that facilitates the match between buyers and sellers." @default.
- W2496382570 created "2016-08-23" @default.
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- W2496382570 date "2011-05-24" @default.
- W2496382570 modified "2023-09-23" @default.
- W2496382570 title "Nonlinear Pricing in E-Commerce" @default.
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- W2496382570 doi "https://doi.org/10.4018/978-1-59904-813-0.ch007" @default.
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