Now researchers from the Smith School of Business at the University of Maryland, and the Indian School of Business in Hyderabad, have quantified that surplus – the key to eBay’s value proposition, particularly during rough economic times. Writing in an upcoming issue of Information Systems Research, the researchers report that eBay buyers saved more than $7 billion in 2003 and $8.4 billion in 2004. Extrapolating from their data, they project that consumers saved $19 billion on eBay last year.
The researchers quantified the surplus by using a sniping agent called Cniper to track 4,500 eBay auctions in 2003 and 2004. (Sniping software lets people automatically bid on auctions in the final moments.) By using the sniper software, the researchers could track the highest bids and measure the difference with the winning bid – an average of $4, or 30 percent savings on the average $14 eBay auction.
“Everyone is talking about the recession. This is where people are conscious of the money they are spending,” Galit Shmueli, an assistant professor of management science and statistics at Smith. “EBay should try to extract more of this consumer surplus.”