A new study has shown that eBay buyers save billions buying on the site. The independent research by two statisticians from the University of Maryland’s Robert H. Smith School of Business measures the difference between highest bids and actual prices paid on eBay. Using data from bid sniping software Cniper and generalising that across all eBay sales, the researchers estimated that in 2003 (the year to which their data related), buyers would have saved $7 billion; a linear projection of the same figures would give $19 billion saved during 2007.
The study is useful in measuring “consumer surplus”, that is, the difference between what buyers would have been willing to pay, and what they did in fact pay. Normally this is very hard to quantify: Tesco checkout assistants can’t ask their customers how much more they would have paid for their shopping basket, or if they did, they’d get very few meaningful answers. But the eBay proxy bidding system, where the high bidder only has to pay one “bid increment” above their nearest rival, can provide much more accurate data on what buyers’ top prices would be. The less cheerful take on the same data, of course, says that last year eBay sellers lost $19 billion their buyers would have been willing to pay.