Selling on eBay -
Researchers find the most profitable Auctions depends of the Price of
Item and Shipping Costs
Sort By Price on
A recent study that economics
professors at the UC Berkeley Haas School of Business and Hong Kong
University of Science and Technology found that you can boost your
profits by starting with a low opening bid price and charge higher
shipping charges. They study was first reported in the current edition
of Advances in Economic Analysis & Policy.
According to eBay rules you are not
supposed to raise shipping cost to avoid eBay fees, but those that do
this which are many, are usually making more sales on eBay. You may be
faced with account suspension, but it seems like these sellers open new
accounts regularly to compensate to get these profits.
Professor John Morgan from Haas, and
Assistant Professor Tanjim Hossain listed 80 eBay auctions for new music
CDs and Xbox video games. The priced the auction differently to see
what pricing would work the best. They had duplicate titles for the
listing that were popular artists and game titles.
dividing a price into these two pieces should have little effect on
overall demand for a good, they thought. A perfectly informed and
fully rational consumer will merely add together the two parts of a
price to obtain the total out of pocket price for an item and then
decide whether to buy and how much to bid based on this total price.
To the researchers surprise they
found out that they were wrong. The eBay auctions that were lowered on
the opening bid price and raising the shipping charges had more bidders
earlier on. This caused more bidding on the auction and forced the
price to go up even higher. The professors acknowledge that the reason
that this must happen is because the consumer is not paying attention or
looking at shipping costs when bidding on an item.
The auctions were divided into
groups. One auction had a total starting price of $4 and the other half
had a total starting price at $8. Of the $4 group, half of these were
started at the one penny bid price with a $3.99 shipping charge. The
other $4 group had free shipping.
The $8 group was divided with half
of the auctions started with an opening bid of $2 with a high shipping
cost of $6. The other group was the opposite, with a $6 opening bid
with a low $2 shipping cost.
The $4 group that started at 1 penny
sold had more bidders and higher sales totals. There was an average of
21 % higher final sale price than those that had free shipping. The $8
group that had the lower starting bid had an average of 11% higher final
sale price compared with the $2 shipping group.
Best Syndication Staff Writer
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