eBay and ?calor licitantis?

A fascinating study about how purchasers behave on eBay has led me to reaffirm 3 highly-relevant things about persuadability:

  1. The decision to buy is hardly rational or scientific.
  2. Transparency, as regards our pricing and associated costs, right from the start is fundamental for the online sale of any product or service.
  3. Social acceptance is a key factor in any shopping process. Knowing that you are not the only person interested in a product makes many of us happier with the decision to buy that we are about to make.

Different economists ? among them Ulrike Malmendier from Berkeley University ? have been analysing how eBay users buy and sell all kinds of products.  And the most surprising thing is that between 43 and 50% of the users who bid in the various auctions that they analysed offered more than the ?Buy it now? direct price. According to this article, this reproduces what the Romans used to call: ?Calor licitantis?, which leads the people taking part in a bidding process to behave quite irrationally when the bidding heats up.

The same study refers to a very interesting phenomenon: Bidding that starts at 1 cent and $3.99 postage costs improves the final prices of the transaction up to 25% more than bids starting at $4 with free postage. This leads her to postulate that people act on the basis of two premises: the price you are prepared to pay to purchase the product and the price you are prepared to pay for postage.

There is a third, remarkable aspect and that is that the social acceptance of the purchase determines how much interest it generates. The more previous bids there are, the greater the interest that the product on eBay generates. That is why it is important to begin with very low starting-prices. This can be extrapolated to refer to any store or business. Would it help to sell more if we indicate how many people have bought a particular product today?

 

It is worth testing it with Google Website Optimizer.

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