will dynamic pricing outperform theoretical analysis and empirical evidence from o2o on demand food service market abstract this study attempts to identify the pricing strategy of three most commonly used on demand food service platforms in china based on detailed information of more than 240 000 orders and further evaluates the impact of pricing strategy on platform performance we find that some platforms adopt dynamic pricing strategies while other platforms adopt static pricing strategies considering the unique structure of the o2o on demand food service market in china we develop a dyadic two sided market theory and demonstrate that compared with static pricing strategies dynamic pricing strategies perform better consistent with our theory our empirical analysis also suggests that platforms adopting dynamic pricing strategies have a significantly higher level of demand compared with platforms adopting static strategies in addition our results indicate the importance of delivery speed red envelopes and ratings in promoting demand

close the gaps a learning while doing algorithm for single product revenue management problems we consider a retailer selling a single product with limited on hand inventory over a finite selling season customer demand arrives according to a poisson process the rate of which is influenced by a single action taken by the retailer such as price adjustment sales commission advertisement intensity etc the relationship between the action and the demand rate is not known in advance however the retailer is able to learn the optimal action on the fly as she maximizes her total expected revenue based on the observed demand reactions using the pricing problem as an example we propose a dynamic learning while doing algorithm that only involves function value estimation to achieve a near optimal performance our algorithm employs a series of shrinking price intervals and iteratively tests prices within that interval using a set of carefully chosen parameters we prove that the performance of our algorithm is among the best of all possible algorithms in terms of the asymptotic regret the relative loss compared to the full information optimal solution our result closes the performance gaps between parametric and nonparametric learning and between the post price mechanism and the customer bidding mechanism important managerial insight from this research is that the values of information on both the parametric form of the demand function as well as each customer s exact reservation price are less important than prior literature suggests our results also suggest that firms would be better off to perform dynamic learning and action concurrently rather than sequentially

a dollar for your thoughts feedback conditional rebates on ebay we run a series of controlled field experiments on ebay where buyers are rewarded for providing feedback our results provide little support for the hypothesis of buyers rational economic behavior the likelihood of feedback barely increases as we increase feedback rebate values also the speed of feedback bid levels and the number of bids are all insensitive to rebate values by contrast we find evidence consistent with reciprocal buyer behavior lower transaction quality leads to a higher probability of negative feedback as well as a speeding up of such negative feedback however when transaction quality is low as measured by slow shipping offering a rebate significantly decreases the likelihood of negative feedback all in all our results are consistent with the hypothesis that buyers reciprocate the sellers good deeds feedback rebate high transaction quality with more frequent and more favorable feedback as a result sellers can buy feedback but such feedback is likely to be biased data as supplemental material are available at http dx doi org 10 1287 mnsc 2014 2074 this paper was accepted by teck hua ho behavioral economics

equilibrium in auctions with entry the authors model entry incentives in auctions with risk neutral bidders and characterize a symmetric equilibrium in which the number of entrants is stochastic the presence of too many potential bidders raises coordination costs that detract from welfare the authors show that the seller and society can benefit from policies that reduce market thickness i e the relative abundance of buyers their analysis extends well known revenue equivalence and ranking theorems but also demonstrates that variations in the auction environment affect optimal policies e g reservation prices in ways not anticipated by models that ignore entry copyright 1994 by american economic association

simultaneously learning and optimizing using controlled variance pricing price experimentation is an important tool for firms to find the optimal selling price of their products it should be conducted properly since experimenting with selling prices can be costly a firm therefore needs to find a pricing policy that optimally balances between learning the optimal price and gaining revenue in this paper we propose such a pricing policy called controlled variance pricing cvp the key idea of the policy is to enhance the certainty equivalent pricing policy with a taboo interval around the average of previously chosen prices the width of the taboo interval shrinks at an appropriate rate as the amount of data gathered gets large this guarantees sufficient price dispersion for a large class of demand models we show that this procedure is strongly consistent which means that eventually the value of the optimal price will be learned and derive upper bounds on the regret which is the expected amount of money lost due to not using the optimal price numerical tests indicate that cvp performs well on different demand models and time scales this paper was accepted by assaf zeevi stochastic models and simulation

real time dynamic pricing with minimal and flexible price adjustment we study a standard dynamic pricing problem where the seller a monopolist possesses a finite amount of inventories and attempts to sell the products during a finite selling season despite the potential benefits of dynamic pricing many sellers still adopt a static pricing policy because of 1 the complexity of frequent reoptimizations 2 the negative perception of excessive price adjustments and 3 the lack of flexibility caused by existing business constraints in this paper we develop a family of pricing heuristics that can be used to address all these challenges our heuristic is computationally easy to implement it requires only a single optimization at the beginning of the selling season and automatically adjusts the prices over time moreover to guarantee a strong revenue performance the heuristic only needs to adjust the prices of a small number of products and do so infrequently this property helps the seller focus his effort on the prices of the most important products instead of all products in addition in the case where not all products are equally admissible to price adjustment due to existing business constraints such as contractual agreement strategic product positioning etc our heuristic can immediately substitute the price adjustment of the original products with the price adjustment of similar products and maintain an equivalent revenue performance this property provides the seller with extra flexibility in managing his prices

market transparency adverse selection and moral hazard we study the eects of improvements in market transparency on ebay on seller exit and continuing sellers behavior an improvement in market transparency by reducing strategic bias in buyer ratings led to a significant increase in buyer valuation especially of sellers rated poorly prior to the change but not to an increase in seller exit when sellers had the choice between exiting a reduction in adverse selection and improved behavior a reduction in moral hazard they preferred the latter because of lower cost increasing market transparency improves on market outcomes

how valuable is a good reputation a sample selection model of internet auctions on the online auction site ebay by convention sellers do not ship goods to winning bidders until after they have received payment so there is an opportunity for sellers to take advantage of bidders trust realizing this the designers of ebay created a system that relies on self enforcement using reputation several recent studies have found that bidders give little or no reward to sellers who have better reputations i show that in fact sellers are strongly rewarded for the first few reports that they have behaved honestly but marginal returns to additional reports are severely decreasing

dynamic pricing of inventory capacity with infrequent price changes we consider a problem of dynamically pricing a single product sold by a monopolist over a short time period if demand characteristics change throughout the period it becomes attractive for the company to adjust price continuously to respond to such changes i e price discriminate intertemporally however in practice there is typically a limit on the number of times the price can be adjusted due to the high costs associated with frequent price changes if that is the case instead of a continuous pricing rule the company might want to establish a piece wise constant pricing policy in order to limit the number of price adjustments such a pricing policy which involves optimal choice of prices and timing of price changes is the focus of this paper we analyze the pricing problem with a limited number of price changes in a dynamic deterministic environment in which demand depends on the current price and time and there is a capacity inventory constraint that may be set optimally ahead of the selling season the arrival rate can evolve in time arbitrarily allowing us to model situations in which prices decrease increase or neither we consider several plausible scenarios where pricing and or timing of price changes are endogenized various notions of complementarity single crossing property supermodularity and total positivity are explored to derive structural results conditions sufficient for the uniqueness of the solution and the monotonicity of prices throughout the sales period furthermore we characterize the impact of the capacity constraint on the optimal prices and the timing of price changes and provide several other comparative statics results additional insights are obtained directly from the solutions of various special cases

international entrepreneurship in internet enabled markets abstract despite the increasing numbers of businesses that are already using the internet to pursue international opportunities and the latent potential for such activity from rising internet adoption levels the international entrepreneurship literature has paid limited attention to the phenomenon to address this gap we review past research in international entrepreneurship as well as the broader fields of entrepreneurship international business marketing management and management information systems to identify firm level resources that are associated with the successful pursuit of international opportunities in internet enabled markets we identify three such internet related firm level resources online reputation online technological capabilities and online brand communities we develop a propositional inventory of the expected relationships identify measures expected to be useful to future scholars in this area and present the implications of our review for future international entrepreneurship research

economic insights from internet auctions this paper surveys recent studies of internet auctions four main areas of research are summarized first we survey several studies that document and attempt to explain the frequently observed sniping or last second bidding behavior in these auctions second we summarize several methods proposed to quantify the distortions caused by asymmetric information in these markets most notably due to the winner s curse third we explore research about the role of reputation mechanisms installed to help combat these distortions finally we discuss what internet auctions have to teach us about auction design

on the surprising sufficiency of linear models for dynamic pricing with demand learning we consider a multiperiod single product pricing problem with an unknown demand curve the seller s objective is to adjust prices in each period so as to maximize cumulative expected revenues over a given finite time horizon in doing so the seller needs to resolve the tension between learning the unknown demand curve and maximizing earned revenues the main question that we investigate is the following how large of a revenue loss is incurred if the seller uses a simple parametric model that differs significantly i e is misspecified relative to the underlying demand curve we measure performance by analyzing the price trajectory induced by this misspecified model and quantifying the magnitude of revenue losses as a function of the time horizon relative to an oracle that knows the true underlying demand curve the price of misspecification is expected to be significant if the parametric model is overly restrictive somewhat surprisingly we show under reasonably general conditions that this need not be the case this paper was accepted by gerard cachon stochastic models and simulation

equilibrium bid functions for auctions with an uncertain number of bidders abstract the number of rivals may be unknown when a bidding strategy is formulated in an auction in a symmetric model with risk neutral bidders holding independent information we obtain explicit equilibrium bidding functions for first price and second price auctions with uncertainty about the number of rivals five auctions are revenue equivalent first price and second price auctions each with the number of bidders known or uncertain and english auctions

promotional reviews an empirical investigation of online review manipulation abstract firms incentives to manufacture biased user reviews impede review usefulness we examine the differences in reviews for a given hotel between two sites expedia com only a customer can post a review and tripadvisor com anyone can post we argue that the net gains from promotional reviewing are highest for independent hotels with single unit owners and lowest for branded chain hotels with multiunit owners we demonstrate that the hotel neighbors of hotels with a high incentive to fake have more negative reviews on tripadvisor relative to expedia hotels with a high incentive to fake have more positive reviews on tripadvisor relative to expedia jel l15 l83 m31

dispute resolution or escalation the strategic gaming of feedback withdrawal options in online markets many online markets encourage traders to make good after an unsatisfactory transaction by offering the opportunity to withdraw negative reputational feedback in a dispute resolution phase motivated by field evidence and guided by theoretical considerations we use laboratory markets with two sided moral hazard to show that this option contrary to the intended purpose produces an escalation of dispute the mutual feedback withdrawal option creates an incentive to leave negative feedback independent of the opponent s behavior to improve one s bargaining position in the dispute resolution phase this leads to distorted reputation information and less trust and trustworthiness in the trading phase buyers who refuse to give feedback strategically even when it comes at a personal cost mitigate the detrimental impact it is also mitigated in markets with one sided moral hazard and a unilateral feedback withdrawal option the supplementary appendix is available at https doi org 10 1287 mnsc 2017 2802 t

5 information impact and allocation rules in auctions with affiliated private values a laboratory study in affiliated private value auctions each bidder has perfect information regarding his her own value for the object at auction but higher values of the item for one bidder make higher values for other bidders more likely we report on a series of experiments examining three key implications of these auctions i in a first price auction public information about rivals values increases expected revenue ii an english auction increases expected revenue compared to a first price auction and iii a second price auction is isomorphic to an english auction in examining these issues we compare predictions of some ad hoc bidding models with nash equilibrium predictions in the first price auction experiments nash equilibrium bidding theory organizes the data better than either of two ad hoc bidding models public information about others valuations does increase average revenue but the increase in revenue is smaller and less reliable than predicted under risk neutral nash equilibrium bidding lower average revenue might be attributed to risk aversion while the high variability is attributed to a sizable frequency of individual bidding errors relative to the theory bidding theory precisely organizes english auction outcomes after a brief initial learning period the dominant strategy equilibrium does not organize second price auctions nearly as well as market prices persistently exceed predicted prices the difference between english and second price outcomes is attributed to effects of different information flows inherent in the structure of the two institutions on eliminating bidding errors revenue impacts of these two institutions relative to a first price auction are examined in light of observed bidding patterns

technical note dynamic pricing and demand learning with limited price experimentation in a dynamic pricing problem where the demand function is not known a priori price experimentation can be used as a demand learning tool existing literature usually assumes no constraint on price changes but in practice sellers often face business constraints that prevent them from conducting extensive experimentation we consider a dynamic pricing model where the demand function is unknown but belongs to a known finite set the seller is allowed to make at most m price changes during t periods the objective is to minimize the worst case regret i e the expected total revenue loss compared with a clairvoyant who knows the demand distribution in advance we demonstrate a pricing policy that incurs a regret of ologmt or m iterations of the logarithm furthermore we describe an implementation of this pricing policy at groupon a large e commerce marketplace for daily deals the field study shows significant impact on revenue and bookings the e companion is available at https doi org 10 1287 opre 2017 1629

optimal starting times for end of season sales and optimal stopping times for promotional fares many industries face the problem of selling a fixed stock of items over a finite horizon these industries include airlines selling seats before planes depart hotels renting rooms before midnight theaters selling seats before curtain time and retailers selling seasonal goods such as air conditioners or winter coats before the end of the season given a fixed number of seats rooms or coats the objective for these industries is to maximize revenues in excess of salvage value when demand is price sensitive and stochastic pricing is an effective tool to maximize revenues in this paper we address the problem of deciding the optimal timing of a single price change from a given initial price to either a given lower or higher second price under mild conditions we show that it is optimal to decrease resp to increase the initial price as soon as the time to go falls below resp above a time threshold that depends on the number of yet unsold items

bayesian dynamic pricing policies learning and earning under a binary prior distribution motivated by applications in financial services we consider a seller who offers prices sequentially to a stream of potential customers observing either success or failure in each sales attempt the parameters of the underlying demand model are initially unknown so each price decision involves a trade off between learning and earning attention is restricted to the simplest kind of model uncertainty where one of two demand models is known to apply and we focus initially on performance of the myopic bayesian policy mbp variants of which are commonly used in practice because learning is passive under the mbp that is learning only takes place as a by product of actions that have a different purpose it can lead to incomplete learning and poor profit performance however under one additional assumption a constrained variant of the myopic policy is shown to have the following strong theoretical virtue the expected performance gap relative to a clairvoyant who knows the underlying demand model is bounded by a constant as the number of sales attempts becomes large this paper was accepted by gerard p cachon stochastic models and simulation

the behavior of inexperienced bidders in internet auctions i introduction as has now been documented in many studies the internet auction market has quickly become a thriving marketplace in the united states the market is dominated by ebay in the second quarter of 2007 alone ebay users posted a total of 559 million listings resulting in gross merchandise value the total amount that all goods sold for of 14 46 billion 1 this impressive success has occurred despite the fact that bidders face substantial risks because of the nature of the market sellers by convention do not send goods to winning bidders until after they have received payment the seller can then simply pocket the money or send an item of poor quality a widespread and widely publicized example of this behavior occurred in 2002 when a seller with a history of over 6 000 properly conducted transactions sold hundreds of porcelain collectibles on 4 january 2002 but did not send the winners anything after receiving payments of about 300 000 2 a consumer who is defrauded by a seller has little recourse because the identity of a seller is known only through an e mail address which can be anonymously obtained 3 to solve this problem rather than formally enforcing contracts ebay has established an innovative reputation system which allows winning bidders to post ratings of sellers actions that are publicly viewable and vice versa the ratings are classified as positive neutral or negative this information is also presented as a feedback rating that is equal to the number of positive reports received from unique trading partners minus the number of negative reports received from unique trading partners 4 potential bidders can use this information to form expectations about how the seller will behave in the future and reward sellers who develop good reputations by bidding more and more often in their auctions the seller s benefits to a good reputation can come in two forms an auction can be more likely to attract bidders and thus result in a sale and bidders can be willing to bid larger amounts most studies do find that auctions are more likely to end in a sale if the seller is more reputable however the results regarding the amount by which bids increase as the seller s reputation improves have been quite mixed some find that bid amounts increase substantially as the seller s reputation improves some find extremely small increases in bid amounts and some find no increase in bid amounts at all 5 the prevalence of studies that show very small changes in bidder behavior as the seller s reputation improves has led to an apparent consensus that the returns to reputation in internet auctions are indeed quite small for example in the september 2007 issue of the journal of economic literature macleod 2007 refers to bajari and hortacsu s survey and notes that the results are rather consistent mikhail i melnik and james alto 2002 paul resnick and richard zeckhauser 2002 and luis cabral and hortacsu 2004 all find that there is a positive relationship between price and quality of the seller s reputation however the overall effect appears to be small despite this consensus recent studies favor the hypothesis that there is a significant increase in bid amounts as the seller s reputation improves melnik and aim 2005 find that the returns to an improved seller reputation increase when there is more uncertainty about product quality livingston 2005 shows that sellers are strongly rewarded for the first few reports that they have behaved honestly but marginal returns to additional reports are severely decreasing he notes that other studies may have found small increases in bid amounts because they typically assume that the relationship between the price and the number of positive reports received by the seller is linear or log linear if marginal returns to reputation are severely decreasing these functional forms may only pick up the small returns that occur after an initial reputation is established

a game theoretic model for the role of reputation feedback systems in peer to peer commerce abstract we propose a dynamic game theoretic model to study how a reputation feedback system affects a peer to peer p2p trading platform continuums of buyers and sellers with bounded rationalities are paired to trade periodically sellers have private knowledge on their own types that encode tendencies to cheat their reputation scores are on the other hand visible to all and periodically updated by their trading partners a buyer can use a seller s score to assess the latter s characters and decide whether to trade using a continuity based fixed point theorem we first establish the existence of equilibria that convey information on traders behaviors as well as the type score composition on the market we then look into a special case which for model tractability includes two types of sellers with two score levels besides the proportion of prone to cheating sellers it indicates that how much sellers value their future payoffs also plays a major role in determining the prevalence of online frauds therefore reputation feedback systems are especially beneficial under high trading volumes which can in turn for instance be facilitated by attracting more buyers to the online marketplace

international factor mobility and national advantage abstract in this paper we prove rigorously v k ramaswami s proposition that in bilateral trade between two countries sharing the same technology represented by a strictly concave production function with positive marginal productivities of capital and labor the policy active country can gain more by importing monopsonistically the relatively scarce factor than by placing monopolistic restrictions on the export of the relatively abundant one we show that what matters is not the location but the constraints within which maximization takes place hence the monopsonistic results can be replicated by appropriate export arrangements the analysis is extended to consider the welfare implications to the policy passive country

the market for evaluations recent developments in computer networks have driven the cost of distributing information virtually to zero creating extraordinary opportunities for sharing product evaluations the authors present pricing and subsidy mechanisms that operate through a computerized market and induce the efficient provision of evaluations the mechanisms overcome three major challenges first evaluations which are public goods are likely to be underprovided second an inefficient ordering of evaluators may arise and third the optimal quantity of evaluations depends on what is learned from the initial evaluations

periodic pricing of seasonal products in retailing this paper studies intertemporal pricing policies when selling seasonal products in retail stores we first present a continuous time model where a seller faces a stochastic arrival of customers with different valuations of the product for this model we characterize the optimal pricing policies as functions of time and inventory we use this model as a benchmark against which we compare more realistic models that consider periodic pricing reviews we show that the structure of the optimal pricing policies in this case is consistent with the procedures observed in practice retail stores successively discount the product during the season and promote a liquidation sale at the end of the planning horizon we also show that the loss experienced when implementing periodic pricing reviews instead of continuous policies is small when the appropriate number of reviews is chosen several interesting economic insights emerge from our analysis for example uncertainty in the demand for new products leads to higher prices larger discounts and more unsold inventory finally we study the effect of announced discount policies on prices and profits we show that stores that have adopted this type of strategy usually set prices such that with high probability the merchandise is sold during the first periods and the largest discounts rarely take place

dynamic pricing under a general parametric choice model we consider a stylized dynamic pricing model in which a monopolist prices a product to a sequence of t customers who independently make purchasing decisions based on the price offered according to a general parametric choice model the parameters of the model are unknown to the seller whose objective is to determine a pricing policy that minimizes the regret which is the expected difference between the seller s revenue and the revenue of a clairvoyant seller who knows the values of the parameters in advance and always offers the revenue maximizing price we show that the regret of the optimal pricing policy in this model is theta sqrt t by establishing an omega sqrt t lower bound on the worst case regret under an arbitrary policy and presenting a pricing policy based on maximum likelihood estimation whose regret is cal o sqrt t across all problem instances furthermore we show that when the demand curves satisfy a well separated condition the t period regret of the optimal policy is log t numerical experiments show that our policies perform well

reputation formation and the evolution of cooperation in anonymous online markets theoretical propositions stressing the importance of trust reciprocity and reputation for cooperation in social exchange relations are deeply rooted in classical sociological thought today s online markets provide a unique opportunity to test these theories using unobtrusive data our study investigates the mechanisms promoting cooperation in an online auction market where most transactions can be conceived as one time only exchanges we first give a systematic account of the theoretical arguments explaining the process of cooperative transactions then using a large dataset comprising 14 627 mobile phone auctions and 339 517 dvd auctions we test key hypotheses about the effects of traders reputations on auction outcomes and traders motives for leaving feedback our statistical analyses show that sellers with better reputations have higher sales and obtain higher prices furthermore we observe a high rate of participation in the feedback system which is largely consistent with strong reciprocity a predisposition to unconditionally reward or punish one s interaction partner s cooperation or defection and altruism a predisposition to increase one s own utility by elevating an interaction partner s utility our study demonstrates how strong reciprocity and altruism can mitigate the free rider problem in the feedback system to create reputational incentives for mutually beneficial online trade

the theory of international factor flows the basic model abstract the basic model used to discuss the simultaneous international flow of labor and capital is a one commodity model in which a common technology is shared between countries the ramaswami result wherein an optimal restriction of labor inflows is superior to an optimal restriction on capital outflows for a capital abundant country is extended to reveal that optimality requires inflows of both factors box diagrams and iso welfare contours are used to show how optimal policy rankings are reversed if foreign labor must be paid higher home wages

nonparametric advertising budget allocation with inventory constraint abstract in this paper we study the optimization problem of the advertising budget allocation for revenue management faced by a marketer besides the advertising budget the marketer is subject to an inventory constraint during the promotion season the marketer can affect sales by spending on advertising but does not initially know the relationship between the advertising expense and consequent sales we propose a nonparametric learning while doing budget allocation policy for the problem specifically we first conduct a sequence of advertising experiments to learn predict the market sales response through observing realized sales exploration then based on the learned sales function determine the following budget allocation planning exploitation in particular during the exploration and exploitation phases we need to balance the advertising and inventory budgets simultaneously we show that our policy is asymptotically optimal as the size of the market increases by constructing a worst case example we show that our policy achieves near best asymptotic performance we also provide numerical illustrations to show how our policy works and discuss how its performance changes as the system parameters vary we also glen some managerial implications of our model and policy from the numerical results

dynamic pricing with an unknown demand model asymptotically optimal semi myopic policies we consider a monopolist who sells a set of products over a time horizon of t periods the seller initially does not know the parameters of the products linear demand curve but can estimate them based on demand observations we first assume that the seller knows nothing about the parameters of the demand curve and then consider the case where the seller knows the expected demand under an incumbent price it is shown that the smallest achievable revenue loss in t periods relative to a clairvoyant who knows the underlying demand model is of order t in the former case and of order log t in the latter case to derive pricing policies that are practically implementable we take as our point of departure the widely used policy called greedy iterated least squares ils which combines sequential estimation and myopic price optimization it is known that the greedy ils policy itself suffers from incomplete learning but we show that certain variants of greedy ils achieve the minimum asymptotic loss rate to highlight the essential features of well performing pricing policies we derive sufficient conditions for asymptotic optimality

information acquisition for capacity planning via pricing and advance selling when to stop and act this paper investigates a capacity planning strategy that collects commitments to purchase before the capacity decision and uses the acquired advance sales information to decide on the capacity in particular we study a profit maximization model in which a manufacturer collects advance sales information periodically prior to the regular sales season for a capacity decision customer demand is stochastic and price sensitive once the capacity is set the manufacturer produces and satisfies customer demand to the extent possible from the installed capacity during the regular sales period we study scenarios in which the advance sales and regular sales season prices are set exogenously and optimally for both scenarios we establish the optimality of a control band or a threshold policy that determines when to stop acquiring advance sales information and how much capacity to build we show that advance selling can improve the manufacturer s profit significantly we generate insights into how operating conditions such as the capacity building cost and market characteristics such as demand variability affect the value of information acquired through advance selling from this analysis we identify the conditions under which advance selling for capacity planning is most valuable finally we study the joint benefits of acquiring information for capacity planning through advance selling and revenue management of installed capacity through dynamic pricing

the sound of silence in online feedback estimating trading risks in the presence of reporting bias most online feedback mechanisms rely on voluntary reporting of privately observed outcomes this introduces the potential for reporting bias a situation where traders exhibit different propensities to report different outcome types to the system unless properly accounted for reporting bias may severely distort the distribution of public feedback relative to the underlying distribution of private transaction outcomes and thus hamper the reliability of feedback mechanisms this study offers a method that allows users of feedback mechanisms where both partners of a bilateral exchange are allowed to report their satisfaction to see through the distortions introduced by reporting bias and derive unbiased estimates of the underlying distribution of privately observed outcomes a key aspect of our method lies in extracting information from the number of transactions where one or both trading partners choose to remain silent we apply our method to a large data set of ebay feedback our results support the widespread belief that ebay traders are more likely to post feedback when satisfied than when dissatisfied and are consistent with the presence of positive and negative reciprocation among ebay traders most importantly our analysis derives unbiased estimates of the risks that are associated with trading on ebay that we believe are more realistic than those suggested by a naive interpretation of the unusually high 99 levels of positive feedback currently found on that system

on the choice between international capital and labor mobility abstract this paper examines the choice of international factor mobility it proves in a two country two factor one commodity model that the policy setter when it maximizes its own welfare by following the ramaswami policy of monopsonistic import of its scarce factor impoverishes the passive country furthermore the paper studies the choice of mobility in a two commodity model and shows that the optimality of the monopsonistic import policy extends to a situation with trade in goods lastly it addresses the welfare effects in the passive country in the two commodity model

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined

bidding off the wall why reserve prices may be kept secret abstract this note shows by means of an example that in a common value auction a seller with a random reservation value can increase her ex ante expected profits by following a policy of conducting an auction in which her reserve price is kept secret compared to an auction in which the reserve price is announced by keeping the reserve price secret the seller is able to encourage greater participation from the bidders and can therefore increase the linkage of the price paid to the value of the purchased object journal of economic literature classification numbers d82 d44

vickrey auctions in practice from nineteenth century philately to twenty first century e commerce william vickrey 1961 proposed an auction mechanism in which bidders submit sealed bids and the highest bidder wins the good in return for payment of the second highest bid amount for decades economists have credited vickrey with inventing this auction format and have believed that the vickrey auction is rarely used in practice this paper presents evidence that vickrey auctions have long been the predominant auction format for mail sales of collectible postage stamps stamp auctioneers developed this auction format on their own as early as 1893 even before vickrey was born

on the choice between capital and labour mobility trade theorists since the pioneering work of kemp 1966 have considered the question of national advantage from international factor mobility by considering only one factor to be so mobile kemp analyzed elegantly the question of optimal policies in 2 x 2 x 2 model and showed that since monopoly power could exist in both the goods and factor markets in consequence of international capital mobility the optimal policy intervention would generally involve two policy instruments tariffs cum subsidies on goods and duties cum subsidies on international capital flows jones 1967 subsequently extended kemp s argument to the secondbest context by examining the optimal level of one of these instruments when the other was arbitrarily set at zero elsewhere in this issue brecher 1983 shows in an elegant and original contribution that the jones policy problem is in fact a third best rather than a second best problem as generally believed and that if only one of the tariff and capital mobility taxes cumsubsidies can be used it is generally possible to improve welfare further by admitting an altogether different domestic policy instrument namely a production or consumption tax cum subsidy as the case may be the research of bhagwati was supported by the german marshall fund grant no l 34015 the problem analyzed in the paper was posed in bhagwati 1979 and an early ingenious and neglected analysis in ramaswami 1968 was noted by bhagwati we have profited greatly from these contributions also from reading webb 1970 ramaswami 1970 and a recent paper of calvo and wellisz 1983 on this problem this result is in consonance with the results of bhagwati ramaswami and srinivasan 1969 for the case without international capital mobility but the consonance is intuitive only after the result was established for the case with international capital mobility