As described in Chapter 2, an auction is a market mechanism by which buyers make bids and sellers place offers. Auctions are characterized by the competitive and dynamic nature by which the final price is reached. Auctions, an established method of commerce for generations, deal with products and services for which conventional marketing channels are ineffective or inefficient. The Internet pro...

Digital or information goods are becoming the norm across a wide variety of industries including books, music, entertainment, gaming and education. Due to the fact that the marginal cost of producing or reproducing information goods is very low, it is much easier to customise and personalise them for individual users. Furthermore, sellers of these information goods are increasingly using bundli...

In frictional matching markets with heterogeneous buyers and sellers, sellers incur discrete showing costs to show goods to buyers who incur discrete inspection costs to assess the suitability of the goods on offer. This paper studies how brokers can help reduce these costs by managing the level and mix of goods in their inventory. We find that intermediaries emerge and improve social welfare w...

When some customers are more profitable to serve than others, one might expect sellers to compete more vigorously for the more profitable customers. One way sellers might do this is to sell goods that are purchased primarily by the most profitable customers using a lower mark-up than on other goods. This allows the firms to give discounts to more profitable customers without offering them to le...

In this paper we provide experimental evidence for the importance of reputation in markets with experience goods. In this type of markets high quality cannot be enforced by complete and enforceable contracts. This leads to low efficiency or even the breakdown of markets. A potential remedy to overcome these inefficiencies is reputation formation. In order to study the causal effect of reputatio...

Over the last decade, e-commerce has significantly changed the traditional forms of interaction among humans in conducting business by automating business processes over the Internet. Early seller Web sites consisted of passive text-based catalogs of products that could be manually browsed by potential customers. Online passive catalogs were soon replaced by dynamically updated catalogs contain...

In many markets, consumers obtain price quotes before making purchases. This paper considers a fixed-sample size model of consumer search for price quotes when sellers must spend resources to learn the true cost of providing goods/services. It is found that (1) even with ex ante identical consumers and sellers, there is price dispersion in the equilibrium; (2) the expected equilibrium price can...

A model of finitely repeated price competition between two sellers with differentiated goods and a large buyer is analyzed. The set of pure strategy sequential equilibria is investigated under public and private monitoring. With private monitoring, i.e. when prices are not observable to the competing sellers, all sales are made by the better seller and the set of repeated game equilibrium payof...

We investigate the nature of market failure in a dynamic version of Akerlof (1970) where identical cohorts of a durable good enter the market over time. In the dynamic model, equilibria with qualitatively different properties emerge. Typically, in equilibria of the dynamic model, sellers with higher quality wait in order to sell and wait more than sellers of lower quality. Among other things, w...

It is known that the Bertrand outcome can be avoided when sellers are capacity constrained (Edgeworth 1897); when products are differentiated (d'Aspremont, Gabszewicz, and Thisse 1979); when the model is changed from one of short-run competition to long-run competition (Chamberlin 1929); when consumers are not perfectly informed or if it is costly for them to obtain information (Salop 1977). Ja...