eBay buyers save billions, says report

SAN FRANCISCO: Buyers save billions of dollars each year bidding on eBay auctions, according to a new study that quantifies the benefits online consumers enjoy over and above what is derived by sellers, or eBay itself.

The independent research by two statisticians from the University of Maryland’s Robert H. Smith School of Business found buyers saved $7 billion that they might have otherwise been ready to pay in a study of eBay auction behaviour in 2003.

Applying the same analysis to 2004 buyer data, consumers saved $8.4 billion, said Wolfgang Jank, one author of the study. A linear projection of the research findings would mean consumers saved around $19 billion during 2007, Jank said.

The study seeks to calculate what economists call “consumer surplus” — the difference between the top price buyers were ready to pay and what they actually ended up paying. E-commerce sites provide a treasure trove of data that allows researchers to test out theories of consumer behaviour.

“Consumer surplus is usually very hard to measure,” said study co-author Galit Shmueli. “The problem is that it is hard to ascertain how much a winner or a bidder or a user would have been willing to pay for a certain item.”

Jank and Shmueli are associate professors of decision and information technologies at the University of Maryland. They collaborated with Ravi Bapna, an associate professor at the Indian School of Business, who generated data for the study.