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Warranty, Seller Reputation, and Buyer Experience: Evidence From EBAY Used Car Auctions
Author(s) -
Che Xiaogang,
Katayama Hajime,
Lee Peter,
Shi Nan
Publication year - 2019
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12213
Subject(s) - warranty , reputation , common value auction , business , microeconomics , test (biology) , advertising , marketing , economics , paleontology , social science , sociology , political science , law , biology
Using data from the eBay car auction market, we test several predictions regarding warranties, seller reputation and buyer experience in the determination of the final price. We find that the presence of a warranty generates a price premium, but that its magnitude decreases when the seller has a more established reputation. Compared to private sellers, professional dealers, who are ‘repeated‐game players’ in the market, benefit less from a warranty and its substitutability for seller reputation is relatively small. In addition, a buyer with greater experience tends to pay less for a warranty or for a professional dealership.