Wednesday, June 29, 2011

Advice for selling on eBay motors: use lots of photos


A new economics paper has found that prices for cars sold on eBay motors rises the more photos you post on the site (about $80 extra for each photo).

Remember that adverse selection is caused by the fact that sellers have more information about the quality of the car than do buyers (economists call this "information asymmetry"). If buyers offer a high price, then they get a mixture of high and low quality vehicles, and pay more--on average--than the vehicle is worth. So buyers offer only low prices, correctly anticipating that only low quality vehicles will be offered for sale.

So how does a seller with a high value car convince a buyer that it is of high quality. The authors suggest that offering photos is akin to a guarantee of quality:

By disclosing their private information on the auction Web page in text and photos, the seller offers a contract to potential buyers to deliver the item described in the listing. If the disclosures define sufficiently detailed and enforceable contracts, the initial information asymmetry should play no role in determining the performance of the market.

I received this from a former student who verified that this theory, at least, works in practice:

My most recent eBay vehicle sale was a 102,000 mile seven year old truck, tons of bidding and sold for $11,000 sight unseen to a buyer in New York.

Text of the eBay listing is included links to all of the photos you see here:

Photos of EVERY body panel, EVERY interior angle, EVERY tire, EVERY engine bay angle, etc. Buyer was DELIGHTED upon receipt and couldn't believe I'd sent it to him with a full tank of gas.

3 comments:

  1. There are many ways where we can buy or sell a car because many automobile companies or agencies in the market which may help us for that.

    ReplyDelete
  2. A few years ago, I amazed my father by selling his used car via ebay. Adding a few pictures drove the inquiries up substantially. I know the odometer picture was very desirable for the potential buyers.

    ReplyDelete
  3. At The EC, we help entrepreneurs prepare their pitches to investors and also judge thousands of pitches each year. Whenever entrepreneurs discuss their team, we strongly prefer for the entrepreneur to provide photos, not just names, of team members, because it signals that 1) they are less likely than other entrepreneurs to be lying about their team members (which happens all the time) and 2) their team member was able (or wasn't able) to look like a professional for the ten seconds it takes to get a photo. It's not that we only work with good looking people, but we like the information from the photo and the processes of attaining and displaying it.

    ReplyDelete