eBay's Crowded Evenings: Competition Neglect in Market Entry Decisions
44 Pages Posted: 17 Nov 2005 Last revised: 8 May 2012
Date Written: March 8, 2010
Abstract
Do firms neglect competition when making entry decisions? This paper addresses this question analyzing the time of day at which eBay sellers set their auctions to end. Consistent with competition neglect, it is found that (i) a disproportionate share of auctions end during peak bidding hours, (ii) such hours exhibit lower selling rates and prices, and (iii) peak listing is more prevalent among sellers likely to have chosen ending-time strategically, suggesting disproportionate entry is a mistake driven by bounded rationality rather than mindlessness. The results highlight the importance for marketing researchers of assessing rather than assuming the rationality of firm behavior.
Keywords: Market-entry, excess entry, auctions, last-minute bidding, competition neglect, level-k models, behavioral economics, bounded rationality
JEL Classification: D01, D21, D44, L22
Suggested Citation: Suggested Citation
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