Seller Strategies for Differentiation in Highly Competitive Online Auction Markets

Abstract

We explore the issue of seller differentiation in competitive auction environments, where most sellers have a high percentage of positive feedback. Analyzing a set of eBay auction listings for identical products, we find evidence that the use of visibility-enhancing and quality-signaling discretionary auction attributes affects auction outcomes throughout the auction process (i.e., listing views, bids, and price premiums). We also find strong evidence that the number of reputable sellers in an auction marketplace moderates the effects of these discretionary attributes on auction outcomes. Specifically, as auction environments become more competitive, these attributes become more effective tools for differentiation, whereas seller feedback scores become less effective. Furthermore, sellers appear to select their strategies for employing these discretionary attributes based on both their prior experience and the number of experienced reputable sellers in the market. These findings suggest that in addition to relying on feedback scores, online sellers must take a more strategic approach in the selection of discretionary attributes in their auction listings.