Are eBay Auctions Rational?
from the check-the-data dept
There's been a trend in the last few years to suggest that a new group of economists are somehow "disproving" the traditional "neoclassical" basis for economics: that of "the rational person." A recent article in The Nation is the latest in a long line of articles claiming that there's a growing group of economists going against the grain. The problem, however, is that almost every time you look at the details, they don't actually disprove the rational person. They simply point out that the rational person is rational based not just on data and dollars -- but on many other things, including social conventions and peer pressure. That is, when someone makes a "bad" decision in terms of dollars due to peer pressure, that doesn't mean the person is irrational -- it simply means at the instant of the decision they valued the approval of their peers more than the dollar value lost due to the decision. Slate is running an article asking whether or not eBay auctions are rational, looking at some research by an economist who has been studying online auctions for many years. It notes that classical auction theory would suggest that having a "secret" reserve price (the lowest price at which the seller will actually accept the bid) will do better than one where the reserve price is open, because it reinforces the idea that others are interested in the product as well and bidding will move upwards. However, the research showed the opposite. An open reserve price (so you can only start bidding at the reserve price) tends to get more interest. Of course, this doesn't actually answer the question of whether or not eBay auctions are rational. All it shows is that bidders value the certainty of knowing what the reserve price is, and do not value the uncertainty of a secret reserve price that could mean wasted effort in a particular auction. That's hardly irrational.Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
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Rational or mob mentality
Step 1: List item at lowest price you think you will accept.
Step 2: When auction ends relist the item about 15-20% cheaper but increase the shipping and handling fee.
Step 3: Auction ends about 25% above my initial listing price and with about 5 or 6 interested bidders.
Its as if no one wants to make the first move, but when someone does its like chumming the waters.
So I guess based on my decidedly non-scientific methods I would say that eBay auctions are definetly not rational.
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Of course its not rational
1. Sellers that will borderline lie items.
2. The fact that 60% of all items have **RARE!!** in the title. I've seen **RARE!!** copies of Final Fantasy 7 for the PSX. And mind you these copies didn't have any special attributes like still in the orginal shrink, an autograph, or something like that. Just a plain old used copy that has that yellow used price tag from EB Games. Overhype.
3.Real rational auctions end when someone makes a high bid and said bid is unchallenged for X amount of time, not whoever has the highest bid after X amount of time. There is a differnce.
and my personal favorite...
4. Bid sniping. I don't care how you cut it having an automated program that adds current high bid + $1 in the last 5 seconds of the aution is cheating.
Add all that together and I would agree that Ebay "auctions" are not rational.
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Re: Of course its not rational
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Re: Re: Of course its not rational
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Rational article
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ebay buyers not rational
Granted there are deals to be had on eBay, but it really defies all logic to see stuff sell way above current market prices at the local WalMart.
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Re: ebay buyers not rational
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quick answer: "no"
on eBay, you have the crowd mentality in full force, and 'rational' rarely enters that picture.
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Not in economic terms
In economics, "rational" means not taking social conventions or peer pressure into account.
On the other hand, the second article's message that new economics is in the process of overthrowing capitalism is baloney. Behavioral economics has opened up new and interesting windows, but it doesn't invalidate or support any specific type of economy-- it just shows that they're all a little more complicated than previously assumed.
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depends
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My favorite shirt reads...
Listing on ebay is an art, as it defies all logic; most of the time.
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Rationality or not
I think you're stretching the definition of "rationality" a bit. The whole point of the economic game is to maximize monetary returns. Therefore if other players are playing less-than-optimal strategies because of social conventions or peer pressure, then they're not rational, and that's that.
And the fact remains, modern psychology is accumulating a mountain of evidence that, by this very simple definition, people are not rational.
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nothing of the sort
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confusion re: rational
It's about time the "rational consumer" model got tweaked (and possibly thrown on its head). Kahneman & Tversky came up with Prospect Theory back in the 70s.
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Economic Hole
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Advertising
Advertising is ubiquitous, yet very little of it is directed at presenting a rational appeal. To the extent consumers are swayed by advertising, they are not rational; to the extent they are not swayed, business is not rational in purchasing advertising.
Advertising is a 100-plus-billion dollar per year testament to the inapplicability of the theory of rational economic agents. I fail to understand why anyone still takes it seriously.
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rational, never...
The one that springs to mind here is the PS3, i remember seeing an auction for a picture of a PS3 at over $1000
obviously ebay is not rational when someone will pay that much for a picture.
Too many people on the internet are afraid of reading...
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Reserve Prices: Ebay vs. Live auctions
Ebay Auctions are different than live auctions - in live auctions, one thing is being auctioned at a time, so all attention is on that item. With online auctions, people aren't willing to dick around with an item that may have a hidden reserve price, for 2 reasons: 1) Ebay auctions aren't professional, and the reserve price may be idiotic, and 2) it's usually not worth the time when there are other non-reserve (or at least visible minimum price) items available.
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Rationality and Consumption
I argued incessantly in Graduate school about the lack of inclusion of psychological aspects in Macroeconomic equations.
If a woman spends $650 for a pair of Manolos, is that rational? If that $650 was her rent money is that raional? Trying to apply rational constructs to buying is like trying to apply it to religion.
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