Role of resource gap and value appropriation: effect of reputation gap on price premium in online auctions

Abstract

In this study, we draw on the resource-based view of the firm and on value-based models of strategy to examine when firms appropriate value from their superior resources. We argue for the need to take into account the role of the resource gap between competitors rather than the absolute resource stock of the focal firm when examining the resource-performance relationship. In particular, we investigate whether the ability of a reputable seller to command a price premium is influenced by thereputation gap(i.e., the reputation differences between the focal seller and its closest competitor standardized by the reputation stock of both sellers). We test our hypotheses on 72 matched pairs of online transactions screened from more than 2,000 auctions of new mobile phones on the Polish Internet auction site Allegro. We find that the ability of a reputable seller to command a price premium (1) increases with the size of thereputation gapbetween the focal seller and its matched competitor, and (2) becomes increasingly smaller for each additional unit of the sellerreputation gap. Copyright © 2010 John Wiley & Sons, Ltd.