Recently in Electronic markets Category

Wondering who's gonna win this year's Superbowl? Just ask eBay.

The company Mpire is plotting the price of team paraphenalia for the Seattle Seahawks and the Pittsburgh Steelers, in an attempt to see if the price might be a decent predictor of Superbowl victory. The intuition, I suspect, is that people will be buying the merchandise of the team they expect to win, in the hopes that it will increase in value once the win occurs. Aggregating the data into a single price is intended to look something like the confidence that the crowd has in a win by one team or the other.

From a story on the experiment:

The confounding success of the famous Super Bowl economic indicator, where the winning team's conference seems to correlate with the coming year's economy, is spilling over into other areas of voodoo economics. This time it's reversed as eBayers are predicting the outcome of America's time-honored obsession based upon the going price of each team's merchandise.

Right now, Seattle is around $150, while Pittsburgh hovers near $100. Since Pittsburgh is generally viewed as the favorite, I have to wonder if there aren't a lot of people spending rather small amounts of money on Seahawks trinkets just on the off chance that an upset happens. After all, depending on the consumer's belief in the increase of the value, the expected value of the Seahawk do-dad could be above that of the Steeler gee-gaw, no matter what team the consumer believes will win. (Hey, wait -- does that mean we should read this prediction in reverse? Since the crowd seems to favor Pittsburgh, we should expect Seattle-stuff to sell for more? Not sure. My guess at relevent parameters: 1) closeness of the line, since a wide spread might induce people to forget the long-shot bet and snap up the favored-team's stuff before everyone else does, and 2) the price of the item purchased, since a signed t-shirt might go for cheap now, but could increase several times over in value, whereas expensive items require a much greater level of certainty. Anyway...)

Get Better at eBay

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From Knowledge@Wharton, an article on bidding behavior in online auctions:

Would you like to go on an Internet auction site and know how much to bid for a certain item -- and also know that you didn't overpay for that item? How about when you sell an item in an online auction: Would you like to know what price to set that ensures you don't leave money on the online table?

Wharton marketing and statistics professor Eric T. Bradlow can't provide specific answers. But he does offer guidance on the behavior of potential buyers in a new study entitled, "An Integrated Model for Bidding Behavior in Internet Auctions: Whether, Who, When, and How Much," recently published in the Journal of Marketing Research. Bradlow, who is also academic director of the Wharton Small Business Development Center, co-authored the study with Cornell marketing professor Young-Hoon Park. "To the best of our knowledge, this is the first attempt to model formally the behavioral aspects of bidding behavior for the entire sequence of bids in Internet auctions," the authors write.

Here's a a draft of the paper.


The Start of VMT

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In video game circles, the acronym "RMT" stands for "real money trade". This is the long standing practice of people paying real money for virtual goods. Well -- and it was inevitable -- it looks like the direction has been reversed. Via Mashable I saw an article noting that people are starting to sell real-world goods for virtual-world currency.

This may not be the very first instance of the activity, but it has now moved to being a whole business model. There really is nothing surprising about this -- at least if you already don't see anything odd about being able to buy computer hardware for "money" you earned playing a video game.

My question: what's the average amount of time it takes to make, say, 100 Linden dollars? With that information in hand, it should be a quick path to figuring out a few things about the time value of leisure for Second Life players. I think it would be fascinating to compare how long it takes to make the equal amount of buying power in Second Life as in the real world. How many hours would an average player need to work to buy, say, this monitor in Second Life versus her first (real) life? (Running at about $399 at TigerDirect, and 140,000 Linden dollars.)

What I'd expect to find: it takes quite a bit longer in Second Life. But the money would be spent on upgrades and various small computer items that are mprovements on the gaming experience, since I think this would be treated simply as a fun by-product of playing Second Life. That said, I'd also expect to see people under-estimate how long it takes as compared to real world work, possibly implying over-valution of their leisure time. (That is, they think it's pretty fast, and so spend more time playing in the belief that the value of playing the game is higher than it really might be -- though that requires some squishy comparisons in leisure activities, I suppose.)

And just FYI, as of yet, T&B cannot accept Linden Dollars as currency for tips. The regular large donations to Swedish Swiss bank accounts is still the preferred method. (NOTE: Donations will also be accepted in allotments of soda to stave off problems relating to low caffeine supplies for Ian.)

Prediction Markets in Everything

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Here's an interesting new online market: S M A R K E T S :: Product Trading Market. You can buy and sell shares in products that are being sold on Amazon, much like you can trade shares on the future of innumerable things at TradeSports.

It's probably not all that interesting to suggest that the iPod Nano is going to be a stong seller. But if I were a book publisher I'd be keeping regular tabs on this page.

Of course, the lack of real money trading throws in some difficulties, but I think the experiment is fascinating. Since more people trading in these things always help make the experiment a little more robust, why not head over and make a few bets on the next big Amazon product sales.

(Side questions: does it make sense to allow users to write in product reviews before a product is even released? And if you're a seller, or an interested party (an author), would you want to allow or restrict reviews prior to official release? What signal do you send if you don't allow prior review?)

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