Used Good Trade Patterns: A Cross-Country Comparison of ElectronicSecondary Markets
A series of recent papers have investigated the nature of trading andsorting induced by the dynamic price mechanism in a competitive durablegood market with adverse selection and exogenous entry of traders overtime. These models are dynamic versions of Akerlof's (1970) seminalwork. The general set up consist of identical cohorts of durable goods,whose quality is known only to potential sellers, enter the market overtime and a common result is that there exists a cyclical equilibriumwhere all goods are traded within a finite number of periods afterentry. Market failure is reflected in the relationship between productquality (and product reliability) and the length of waiting time beforetrade as well as on the relationship between average price decline andextent of trade of used goods. Based on a unique 9-month datasetcollected from Amazon's secondary market across multiple countries, andmultiple product categories we provide empirical evidence of tradepatterns and the presence of adverse selection. We show how used goodquality and product reliability affect resale turnaround times in anelectronic secondary market. We find some empirical evidence that isconsistent with theoretical predictions existing in the literature.
Year of publication: |
2005
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Authors: | Ghose, Anindya |
Institutions: | NYU Stern School of Business |
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