1. Law of One Price Economics Experiment Keith Salas and Sean Lynam

2. Our Question: Does the law of one price hold on Ebay?

3. Law of One Price “In an efficient market all identical goods must have only one price.” Defines a market as a geographical area, within which the same things are sold for the same price at the same time, allowance being made for transportation cost

4. Ebay Everybody knows what Ebay is

5. Why Should the Law of One Price Hold on Ebay? All new products are the same Only difference is S&H Buyers have similar valuations for products Very competitive, many buyers and sellers

6. The Setup 4 Sets of 4-8 auctions, 1-5 minutes in length All buyers have same valuation Auctions come and go at different times Buyers don’t know when a new auction will enter, but do know when it ends

7. Ebay Love Trying to imitate Ebay Lots of auctions for the same products starting and stopping

8. Round 1 3333 22225555x 1114444

9. Round 1 Results

10. Round 2 33336 2222 1111444

11. Round 2 Results

12. Round 3

13. Round 3 Results

14. Round 4 333 2224 11111

15. Round 4 Results

16. Findings and Interpretations

17. Law of one price did not hold in our experiment The first auction of each round was very close to the valuations of the buyers Fewer available auctions = more bidders in each auction = higher sale prices Findings

18. Findings Part Deux Auctions that started and ended in the middle of the rounds tended to have lesser sale prices Got lost in the mix

19. Interpretations Ebay sellers: when to end auctions? High traffic versus low traffic of Ebay users High traffic: supply greater than demand Low traffic: demand greater than supply

20. If we had to do it again...