Friday, January 30, 2004

Asymmetric Information and eBay

I just finished the lecture in money and banking where I talk about the importance of asymmetric information. In fact I always use the quote:

"The secret of success is to know something nobody else knows" -Aristotle Onassis

Well it looks as though, despite great spell checkers (which I'm sometimes too lazy to use), knowing how to spell can be the secret to success. From the Marginal Revolution:

A whole group of people trolls eBay looking for items that are "misplaced" because their descriptions are spelled incorrectly. If you list your "Haitian" painting as a "Hatian" painting no one will find it with a key word search. In essence this means that no one will find it at all, except of course for these noble entrepreneurs, these enforcers of spelling correctness.

I haven't sold much on eBay, but I've often wondered how important the listing info is to the final selling price, and clearly its very important. I bet there are a lot of other arbitrage opportunities. Even just from the different ways people classify things. If I have some old cycling stuff do I post it in sporting goods or in memorabilia? While you can currently cross list things, you pay full price for the second listing. So you want to try to list the item in the category that is going to attract the largest number of buyers, but if you're not a collector, and only selling one of these items, you might not hit the right category or key words. Then the arbitragers step in to profit from your lack of information...

Keywords: ECO301

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