I am back after some much needed R&R, and too much time spent on eBay. As you may know, eBay has been the focus of much scholarly attention (see here and here and here, for recent examples), so what I have to say in this short space and with limited experience may not be generalizable. As a skeptic of fundamental price efficiency in markets, I was intrigued by my recent search for the complete set of DVDs of Monty Python's Flying Circus. My eBay search revealed many options -- several auctions and even more "Buy It Nows" -- but the least expensive option (by at least 5-10 percent, after accounting for shipping and handling costs) was at Overstock.com. This disparity has an efficient markets explanation, however, because Overstock has a reputation for horrible customer service. Nevertheless, my BizRate search reveals prices ranging from Overstock's low ($107.59) to highs in the mid-$190s. With extremely low search costs offered by internet retailing, shouldn't the prices of commodities like this converge?
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1. Posted by Kaimi on December 30, 2003 @ 8:45 | Permalink
Gordon,
As a (former) purchaser of DVDs on ebay, let me warn you that the quality is very erratic. The same goes for certain merchant agglomerators such as half.com.
The basic problem is that there are many pirated DVDs (largely from mass pirating operations in China, I believe) which are of acceptable enough quality to make it into circulation, but are really inferior products.
In short, I would suggest that you use extreme caution when buying DVDs from ebay. Or, better yet, don't do it, except in cases where the DVDs are not obtainable elsewhere. (Such as Star Wars, which is not available on DVD, unless you get the pirated ebay versions).
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