Bargaining Versus Posted-Price: Evidence from eBay Motors

This paper empirically compares between bargaining and posted price by using data of the fixed-price and the Best Offer listings in eBay Motors. We first show that, consistent with the view that bargaining incurs higher cost than price posting, the sellers who list more items are more likely to adopt the fixed-price format. We then show that Best Offer results in a higher sale rate than the fixed-price format but, if the item is sold, there's no significant difference in transaction price. Given that the seller usually posts a higher buy-it-now price in Best Offer, this can be explained either by the anchoring effect or the sunk-cost fallacy. Moreover, by identifying a variable as the proxy for the seller's bargaining power, we show that the greater bargaining power the seller has, the more likely she is to adopt the fixed-price listing. This result, though counter-intuitive, is consistent with the theoretical prediction in Bester (1993).