Competition Policy Center

The equilibrium model of Ellison, Fudenberg, and Möbius (2004) predicts that, if two competing auction sites are coexisting, then seller revenues and buyer-seller ratios on each site should be approximately equal. We examine these hypotheses using field experiments selling identical items on the eBay and Yahoo auction sites. We find evidence that is inconsistent with the equilibrium hypotheses, and suggest that the eBay-Yahoo market is in the process of tipping. Robust statistical tests indicate that revenues on eBay are consistently 20 to 70 percent higher than those on Yahoo. In addition, eBay auctions attract approximately two additional buyers per seller than equivalent Yahoo auctions. We also vary the Yahoo ending rule from a hard close to soft close but find no statistically or economically significant changes in revenue or numbers of bidders. Moreover, the magnitude of the revenue and buyer-seller ratio disparities remain inconsistent with the notion of equilibrium coexistence even after accounting for various differentiators between the sites.