eBay enables trade on a local, national and international basis. It features a variety of international sites, specialty sites, categories, and services that aim to provide users with the necessary tools for efficient online trading in the auction-style and fixed price formats.

In 2000, the eBay community transacted more than $5 billion in annualized gross merchandise sales (value of goods traded on the eBay site).

On any given day, there are millions of items listed on eBay across thousands of categories. People come to eBay to buy and sell all kinds of practical, unique, and interesting items.

In 2001, there were over 2500 auction sites on the Internet. Some of these sites include: Amazon.com Auctions, Yahoo! Auctions, MSN Auctions, AOL Auctions, Excite Auctions, and UBid. Each of

Competitive Pressures from Substitute Products

The two big newcomers (Yahoo! and Amazon) have a lot of similarities to eBay: similar categories of goods, similar fixed-length English auction bidding rules, and similar auction-listing procedures. All three sites offer proxy bidding, but they differ in their treatment of the end of the auction: Amazon has a 10-minute extension period when there is bidding activity at the end of the auction, Yahoo! gives the seller the option of a 5-minute extension period or a hard close time, and eBay continues to use a hard close time. Another difference is that eBay generally gives the user more options for searching through the auction data, such as the option of browsing through any auction, which closed in the past 30 days. A third difference is in fee structure. Amazon and eBay both charge sellers a listing fee and a percentage commission, while Yahoo! charges no fees at all. The difference in fees has an important effect on sellers’ incentives and behavior. At eBay and Amazon, sellers know that they will incur a fee whether the item sells or not, so they have an incentive to set reasonably low reserve prices to create a higher probability of resulting in a transaction. eBay has 54% of all auctions result in a sale, Amazon’s fraction is 38%, while Yahoo!’s fraction is only 16%.

In addition to the obvious competition between rival bidders, there is also competition between the auctioneers, and even competition between the software developers who provide software for auctioneers. The competition between auctioneers is made even more interesting by the possible pre

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