Toward Understanding Sellers' Choice Of Starting Price Strategies : An Experimental Approach

This paper seeks to explain the eBay-Yahoo! Auction phenomenon: while eBay charged sellers a listing fee and a percentage commission and Yahoo! Auction charged no fees at all, Yahoo! Auction, however, had a significantly lower sold-out rate than eBay, and eBay continued to dominate the C2C auction category. We combine three theoretical perspectives the economic, the psychological and the marketing perspectives to develop our research framework and hypothesis for a fuller understanding of such a puzzle, and try to bridge the great gap between the real world and the theoretical world. A controlled experiment that took into account interactive effects of chances, payoffs, and costs was used to check subjects’ choice of the starting-price strategy in the simulated online auction market environment. We have three major findings. First, subjects generally gave more weight on transaction chance than listing fee and payoff. Second, at the website with high cost incurred, subjects could choose a median starting-price strategy, seeking a higher payoff. Third, subjects did not show strong preference to choose a high starting-price strategy at the website with no cost incurred.