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Selling on eBay - Researchers find the most profitable Auctions depends of the Price of Item and Shipping Costs

March 2nd, 2006

Selling on eBay - Researchers find the most profitable Auctions depends of the Price of Item and Shipping Costs

Sort By Price on eBay

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.

“In theory, 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.

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By Nicole Wilson
Best Syndication Staff Writer

eBay Books

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Copyright 2005 Best Syndication                                     Last Updated Saturday, July 10, 2010 09:49 PM