ABSTRACT
The purpose of this chapter is to examine consumer responses to online auctions, using
eBay as the data source for the number and dollar value of bids on selected products and
for the influence of seller ratings (word of mouth, WOM) on these bids. Its focus on
factors that influence bidding behavior aims at contributing not only to the research
stream, but also to enhancing managerial understanding of online auctions so that sites
can continue to grow apace. In this regard, auction sites-not even a decade old-have
already assumed importance as a new and profitable form of retailing that enables
consumers to engage directly in purchase activity rather than going through other
channels of distribution. That is, consumer-to-consumer auction sites (C2C), much like
the earliest marketing exchanges, enable individuals to act as vendors and purchasers. Yet
despite American consumers’ reputed dislike of haggling and a concomitant tendency to
treat list prices as sacred (Economist, 2000; Coy & Moore, 2000), the number of bidders
and site profits keep growing. Sharp increases in consumer purchases have already
occurred and are predicted to continue: in 1999 consumers spent $3.3 billion (Business
Week, 1999); in 2004 consumer spending on one site, eBay, alone is expected to exceed
$20 billion (Hof, 2004). Overall spending is well in excess of the fivefold increase from
1999 to 2004 that was anticipated by Wilcox (2000). As the average price per item rises,
so do profits (Riley, 1989; Wilcox, 2000), fueled by the affluence of bidders, about half of
whom are college educated and earning over $50,000 annually (Crockett, 1999).
