How Much Is a Dollar Worth? Tipping versus Equilibrium Coexistence on Competing Online Auction Sites

Abstract

Theory models of platform competition predict that prices and buyer‐seller ratios should be approximately equal on coexisting auction sites. Using field experiments on eBay and Yahoo Auctions, we find evidence that is inconsistent with equilibrium hypotheses and suggest that the market is tipping. Prices on eBay are consistently 20–70 percent higher than those on Yahoo, and eBay attracts two additional buyers per seller. On Yahoo, prices and bidders counts are unaffected by the auction ending rule. Various differences between the sites cannot account for the magnitude of these disparities. However, a model of imitation dynamics can rationalize our findings.