Online auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce. We examine a dataset of eBay coin auctions to explore features of online bidding and selling behavior. We address three main issues. First, we measure the extent of the winner's curse. We find that for a representative auction in our sample, a bidder's expected profits fall by 3.2 percent when the expected number of bidders increases by one. Second, we document that costly entry is a key component in understanding observed bidding behavior. For a representative auction in our sample, a bidder requires $3.20 of expected profit to enter the auction. Third, we study the seller's choice of reserve prices. We find that items with higher book value tend to be sold using a secret as opposed to posted reserve price with a low minimum bid. We find that this is, to a first approximation, consistent with maximizing behavior. We also develop new techniques for structurally estimating common value auction models.

We examine the bidding behavior of firms in the Texas electricity spot market, where bidders submit hourly supply schedules to sell power. We characterize an equilibrium model of bidding and use detailed firm-level data on bids and marginal costs to compare actual bidding behavior to theoretical benchmarks. Firms with large stakes in the market performed close to the theoretical benchmark of static profit maximization. However, smaller firms utilized excessively steep bid schedules significantly deviating from this benchmark. Further analysis suggests that payoff scale has an important effect on firms' willingness and ability to participate in complex, strategic market environments. Copyright (c)2008, RAND.

This paper studies the economics of match formation using a novel dataset obtained from a major online dating service. Online dating takes place in a new market environment that has become a common means to find a date or a marriage partner. According to comScore (2006), 17 percent of all North American and 18 percent of all European Internet users visited an online personals site in July 2006. In the United States, 37 percent of all single Internet users looking for a partner have visited a dating Web site (Mary Madden and Amanda Lenhart 2006). The Web site we study provides detailed information on the users' attributes and interactions, which we use to estimate a rich model of mate preferences. Based on the preference estimates, we then examine whether an economic matching model can explain the observed online matching patterns, and we evaluate the efficiency of the matches obtained on the Web site. Finally, we explore whether the estimated preferences and a matching model are helpful in understanding sorting patterns observed "offline," among dating and married couples.Two distinct literatures motivate this study. The first is the market design literature, which focuses on designing and evaluating the performance of market institutions. A significant branch of this literature is devoted to matching markets (Alvin E. Roth and Marilda A. O. Sotomayor 1990), with the goal of understanding the allocation mechanism in a particular market, and assessing whether an alternative mechanism with better theoretical properties (typically in terms

Online auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce. We examine a dataset of eBay coin auctions to explore features of online bidding and selling behavior. We address three main issues. First, we measure the extent of the winner's curse. We find that for a representative auction in our sample, a bidder's expected profits fall by 3.2 percent when the expected number of bidders increases by one. Second, we document that costly entry is a key component in understanding observed bidding behavior. For a representative auction in our sample, a bidder requires $3.20 of expected profit to enter the auction. Third, we study the seller's choice of reserve prices. We find that items with higher book value tend to be sold using a secret as opposed to posted reserve price with a low minimum bid. We find that this is, to a first approximation, consistent with maximizing behavior. We also develop new techniques for structurally estimating common value auction models.

We construct a panel of eBay seller histories and examine the importance of eBay's reputation mechanism. We find that, when a seller first receives negative feedback, his weekly sales rate drops from a positive 7% to a negative 7%; subsequent negative feedback ratings arrive 25% more rapidly than the first one and don't have nearly as much impact as the first one. We also find that a seller is more likely to exit the lower his reputation is; and that, just before exiting, sellers receive more negative feedback than their lifetime average.We consider a series of theoretical models and measure them against these empirical results. Regardless of which theoretical model best explains the data, an important conclusion of our paper is that eBay's reputation system gives way to noticeable strategic responses from both buyers and sellers.

Mate preferences, Dating, Marriage, C78, J12,

provided thoughtful suggestions regarding earlier drafts. We have also benefited from discussions with ABSTRACT Two salient features of the competitive structure of the U.S. mutual fund industry are the large number of funds and the sizeable dispersion in the fees funds charge investors, even within narrow asset classes. Portfolio financial performance differences alone do not seem able to fully explain these features. We investigate whether non-portfolio fund differentiation and information/search frictions also play a role in creating these observed industry characteristics. We focus on their impact in a case study of the retail S&P 500 index funds sector. We find that fund proliferation and price dispersion also exist in this sector, despite the funds'' financial homogeneity. Furthermore, there was a marked shift in sector assets to more expensive (often newly entered) funds throughout our sample period. Our analysis indicates that these observations are consistent with the presence of both nonportfolio differentiation and information/search frictions. Structural estimation of a novel searchover-differentiated-products model reveals that reasonable magnitudes of investor search costs can explain the considerable price dispersion in the sector, and consumers seem to value funds'' observable attributes -such as fund age and the number of other funds in the same fund family-in largely plausible ways. The results also suggest that the substantial increase in mutual fund market participation observed during our sample, and the corresponding purchase decisions of novice investors, drove the shift in assets toward more expensive funds. We also find evidence consistent with the presence of switching costs, as distinct from search costs. Using structural estimates of demand parameters and search costs, we investigate the possibility that there are too many sector funds from a social welfare standpoint. The results of this exercise indicate that restricting entry would yield nontrivial gains from reduced search costs and productivity gains from scale economies, but these may be counterbalanced by losses from increased market power and reduced product variety.

We use broad-based yet detailed data from the economy's goods-producing sectors to investigate firms' ownership of production chains. It does not appear that vertical ownership is primarily used to facilitate transfers of goods along the production chain, as is often presumed: Roughly one-half of upstream establishments report no shipments to downstream establishments within the same firm. We propose an alternative explanation for vertical ownership, namely that it promotes efficient intra-firm transfers of intangible inputs. We show evidence consistent with this hypothesis, including the fact that, after a change of ownership, an acquired establishment begins to resemble the acquiring firm along multiple dimensions.