A research study by two statisticians from the University of Maryland’s Robert H. Smith School of Business—Wolfgang Jank and Galit Shmueli—finds that consumers save billions of dollars every year by buying products through the online auction service eBay rather than going through conventional retailers. The study claims to be the first time the overall economic impact of online auctions—specifically eBay—has been quantified.
The findings will be published in “Consumer Surplus in Online Auctions,” (PDF) an article slated to appear in a future issue of the journal Information Systems Research.
“This is the first time consumer surplus has been quantified in online auctions,” said Shmueli. “You just can’t quantify this for traditional retailers—a store clerk would never get an accurate answer by asking a customer, ‘how much were you really willing to pay for this item?’ We just pay the prices the retailers demand. But on an auction site like eBay, consumers can dictate how much they’re willing to pay.”
The study examined purchase data from more than 4,500 eBay auctions from 2003 gathered from Cniper.com, which automatically bids on auctions at the last minute to help users win items at low prices. The researchers used the difference between a winning bid and the absolute amount Cniper.com users will willing to pay for an item as a calculation of the auction’s surplus. According to the study, consumers saved more than $7 billion in 2003 by using eBay.
Of course, the flip side is that sellers left a potential $7 billion on the floor that consumers were already willing to spend by selling through eBay.