eBay study : “Winning bids” total $19 billion less than “Highest bids”

From the NY Times: Winners of eBay auctions typically pay not the highest amount they bid but the second highest amount, plus the bidding increment of that auction. In other words, there is a gap between what buyers pay and what they are willing to pay – a “consumer surplus” whose size eBay has never revealed, since the company does not share data on the highest bids.

Researchers at the University of Maryland and the Indian School of Business have now quantified the consumer surplus by using a sniping agent called Cniper to track 4500 eBay auctions in 2003 and 2004. 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 savings on the average $14 eBay auction.

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. In other words, the winning bids of all eBay auctions in 2007 was $19 billion less than the
highest bids of all eBay auctions.