First Bid Effect in eBay Auctions of New and Used Montblanc Pens

Abstract

In this paper, the researcher studied the dynamics of online auctions of Montblanc pens on eBay. The researcher compared two sets of auctions: auctions of new pens and auctions of used pens and concluded that substantial differences seem to exist between the two sets of auctions. The researcher also looked at how the first online bid seems to affect the number of bidders and the number of bids in both auctions and concluded that the first bid in an auction seems to have a very strong influence on the outcome of the auction. The shorter the time between the auction start and the first bid, the higher will be the number of bidders and the number of bids in the auction. The researcher called this the “first bid effect”. The research also showed that this phenomenon is more evident in new pens versus used pens. These findings indicate that potential buyers feel more confident in bidding on items on which others have already placed a bid because this ensures to a certain extent that the item sold is genuine and not a replica. This also highlights buyers’ perception that used pens are safer to bid on than new ones that nowadays are easily replicated. It is also clear from the research that the relative value of the starting bid has a much higher impact on the auctions for new pens versus auctions for used ones again emphasizing that there are subtle difference in the way buyers approach these two auctions. In this research the researcher used the relative starting bid variable instead of the traditional starting bid variable that was used in previous research arguing that the value of the starting bid is perceived differently based on the perceived value of the item in the auction.