ebay

You may wonder how I survive being unemployed. It is not easy at all. I am at barely subsistence level for quite a long time. I have some tiny income from selling stuffs in eBay for the past years. It is indeed there are a few things I found very interesting. All are from seller's prospectives.

Since I am one of thousand sellers of identical product, price competition is severe. As I mentioned, I make a living , which means that the price I charge covered by my own labor cost (or time value). This is expected.

What is unexpected is there are a few types of sellers. After a few years in this "industry", I sometimes can identify which type some sellers belongs to. My pricing strategy adjusted accordingly.

One common type is the active type: they charge at a price 1 cent below their competitors. Of course, this is what the Betrand model predict. Since it is not a one time game, every seller has incentive to keep the price at particular high level initially. Then drop by 1 cent in each increment. As a result, there is positive "profit" for prolong period of time.

If I am not busy, I am happy to follow. But in some busy occassions, I need to signal them that I don't have time to "update" the price frequently. I drop the price significantly, say 1 dollar, whenever they charge 1 cents lower than me. By repeating that strategy a few times, they recognize my signal and stop dropping 1 cent, but keep their price at the level as everyone else. (of course, after a while they drop the price 1 cents again, expecting I am away). This strategy sometimes work.

The second type is the passive type: they always set the price identical to others , hopfully to persuade others that sharing the monopoly profit is better than sharing 0 profit. I love them and more than happy to follow. But there are not many of them, as expected.

The third type is the aggressively type. they drop the price aggressively and quickly in order to capture the profit. Almost all of them are one time player. They disappear quickly. I try not compete with them.

Of course, there are a fourth type, which does not have any pre-defined strategy.

time to reset the price...