Tanjim Hossain

...Plus Shipping and Handling: Revenue (Non) Equivalence in Field Experiments on eBay

Abstract Many firms divide the price a consumer pays for a good into two pieces---the price for the item itself and the price for shipping and handling. With fully rational customers, the exact division between the two prices is irrelevant---only the total price matters. We test this hypothesis by selling matched pairs of CDs and Xbox games in a series of field experiments on eBay. In theory, the ending auction price should vary inversely with the shipping charge to leave the total price paid constant. Contrary to the theory, we find that charging a high shipping cost and starting the auction at a low opening price leads to higher numbers of bidders and higher revenues when the shipping charge is not excessive. We show that these results can be accounted for by boundedly rational bidding behavior such as loss-aversion with separate mental accounts for different attributes of the price or disregard for shipping costs.

Competing Matchmakers: An Experimental Analysis

Platform competition is ubiquitous, yet platform market structure is little understood. Theory models typically suffer from equilibrium multiplicity---platforms might coexist or the market might tip to either platform. We use laboratory experiments to study the outcomes of platform competition. When platforms are primarily vertically differentiated, we find that even when platform coexistence is theoretically possible, markets inevitably tip to the more efficient platform. When platforms are primarily horizontally differentiated, so there is no single efficient platform, we find strong evidence of equilibrium coexistence. This paper was accepted by Peter Wakker, decision analysis.

A test of the revenue equivalence theorem using field experiments on ebay

We conducted 80 auctions on eBay. Forty of these auctions were for various popular music CDs while the remaining 40 auctions were for video games for Microsofts Xbox gaming console. The revenue equivalence theorem states that any auction form having the same effective reserve price yields the same expected revenue. The effective reserve price on eBay consists of three components: the opening bid amount, the secret reserve amount, and the shipping and handling charge to keep the overall reserve level fixed. We set no secret reserve price and varied the opening bid and the shipping and handling charge to keep the overall reserve level fixed. When the effective reserve was

When Do Markets Tip? A Cognitive Hierarchy Approach

4, auctions with a low opening bid and high shipping charges attracted more bidders, earlier bidding, and yielded higher revenue than those with a high opening bid and low shipping charges. The same results hold only for Xbox games under the

TESTING THE THEORY OF MULTITASKING: EVIDENCE FROM A NATURAL FIELD EXPERIMENT IN CHINESE FACTORIES: TESTING THE THEORY OF MULTITASKING

8 effective reserve. Unlike the other treatments, where the reserve represents less than 30% of the retail price of the item, for CDs, the

Auctioneers as Market Makers: Managing Momentum in Chittagong Tea Auctions

8 effective reserve represents over 50% of the retail price of the item. In this treatment, we find no systematic difference in the number of bidders attracted to the auction or revenues as a function of how the effective reserve is allocated between opening bid and shipping charges. We show that these results can be accounted for by bounded-rational bidding behavior.

Bargaining with Learning

The market structure of platform competition is critically important to managers and policy makers. Network effects in these markets predict concentrated industry structures, whereas competitive effects and differentiation suggest the opposite. Standard theory offers little guidance---full rationality models have multiple equilibria with wildly varying market concentration. We relax full rationality in favor of a boundedly rational cognitive hierarchy model. Even small departures from full rationality allow sharp predictions---there is a unique equilibrium in every case. When participants single-home and platforms are vertically differentiated, a single dominant platform emerges. Multihoming can give rise to a strong--weak market structure: one platform is accessed by all, and the other is used as a backup by some agents. Horizontal differentiation, in contrast, leads to fragmentation. Differentiation, rather than competitive effects, mainly determines market structure.

Shrouded Attributes and Information Suppression: Evidence from the Field

A well-recognized problem in the multitasking literature is that workers might substantially reduce their effort on tasks that produce unobservable outputs as they seek the salient rewards to observable outputs. Since the theory related to multitasking is decades ahead of the empirical evidence, the economic costs of standard incentive schemes under multitasking contexts remain largely unknown. This study provides empirical insights quantifying such effects using a field experiment in Chinese factories. Using more than 2200 data points across 126 workers, we find sharp evidence that workers do trade off the incented output (quantity) at the expense of the non-incented one (quality) as a result of a piece rate bonus scheme. Consistent with our theoretical model, treatment effects are much stronger for workers whose base salary structure is a flat wage compared to those under a piece rate base salary. While the incentives result in a large increase in quantity and a sharp decrease in quality for workers under a flat base salary, they result only in a small increase in quantity without affecting quality for workers under a piece rate base salary.

Sniping and Squatting in Auction Markets

In an auction market, the auctioneer exerts significant influence in choosing and administering a selling strategy. We make the case for viewing the auctioneer as a market maker, whose success depends on how well he manages externalities without jeopardizing the trust of the buyers and sellers. We illustrate that incentives of the market maker may not be aligned with that of individual sellers. Using a unique data set, from tea auctions in Chittagong, Bangladesh, we argue that an auctioneer’s actions maintain a careful balance of his own incentives vs. those of his clients, and the auction outcomes are affected by how much discretion the auctioneer has in choosing the selling strategy. Specifically, we find that raising the reserve price for a lot exerts a positive price externality on subsequent lots within the auction. To manage the momentum of market prices, the auctioneer chooses higher reserve prices for tea produced by tea estates in which he has an ownership stake. While these teas receive a higher price when sold, they sell less frequently creating a short run cost to the auctioneer but an overall positive impact on market prices. Thus, consistent with the role of a market maker, a desire to appear non-opportunistic, rather than opportunism, seems to better explain the auctioneer’s actions.

The Binarized Scoring Rule

We analyze a continuous-time bargaining game of two-sided incomplete information without time discounting. Consistent with existing results, no trade occurs in the unique equilibrium of this game. Next we assume that players have imperfect information about their types; that is, they do not exactly know their private valuations. We suggest a learning model according to which players learn about their types during the bargaining process. Under some conditions, there exist equilibria of this game where trade occurs with positive probability. Moreover, there exists an equilibrium that is ex-post efficient. This shows that imperfect information and a very simple boundedly rational model of learning can circumvent the Myerson-Satterthwaite theorem. These results continue to hold when the game is extended to allow alternating offers from the buyer and the seller.