Faculty of Economics and Business Administration Publications Database

Measuring Frictional Costs in E-Commerce - The Case of Name-Your-Own-Price Auctions

Spann, Martin
Link External Source: Online Version
Year: 2010
Keywords: Frictional Costs, Electronic Commerce, Name-Your-Own-Price.

Frictional costs are defined as the disutility related to the conduct of an online transaction. Thus,

frictional costs can accrue through the consumer‘s decision-making process prior to an online

transaction, e.g., bidding in interactive pricing mechanisms like auctions. We present two models for

the measurement of frictional costs in Name-Your-Own-Price auctions where these costs can either be

measured through a discount factor or in absolute values. We compare the fit and estimation results of

these models by analyzing bidding data from a German NYOP seller. Our results show that both

models are equally parsimonious, explain a comparable fraction of variance and both models yield

robust and reasonable parameter estimates.