Abstract :
In this paper, the author used Structure Equation Modeling to study Gold auctions in eBay. The author was able to show that scrap gold (per gram) fetches higher price than useable gold. This discrepency might imply that there is stronger competition for scrap gold and/or willingness of buyers to bid a higher price for it. This seems to run against common sense, because while scrap gold can only be used for investment, useable Gold can be used both as an investment and as wearble jewery. One explanation of this might be the fact that testing the purity of gold can result in some damage to the item being tested. While this clearly might not be an issue with scrap gold, it might be a serious issue when trying to return a useable item to the seller after testig it because the item can not be claimed to be in the same condition any more.
While previous studies have found that the number of bids in an auction positively influence the final selling price, in this paper on the other hand, this relationship was found to be significant but negative. This implies that since gold is bought primarily as an investment and because the potential buyers seem to be already aware of the actual gold value of the item, they tend to bid more conservatively when they see a lot bids on the item. The actual dynamics are a bit complicated though, because although the number of bids is negatively influencing the selling price, the number of bidders seems to positively influence the price. And adding to the complexity, the number of bids will positively influence the number of bidders which seems to imply a herd behavior. Accordingly, one additional bid will directly have a negative effect on the price but indirectly (through the number of bidders) have a positive effect. Also, unlike previous research, this study was not able to show that there is any relationship between the shipping cost and the final selling price.
