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.
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
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
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
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When I found out I was pregnant with our youngest daughter (the youngest of 6) I made the decision that my husband's 1978 Honda Motorcycle had to go. Right Then. I promptly posted it on eBay with probably 20 photos. I thought I would never sell it - it had Mighty Putty on the muffler for goodness sakes! But it turns out - that particular motorcycle has a lot of nostalgia for enthusiasts, as it is typically a 'first bike'. It sold within an hour. My husband was unaware of the fact I had sold it. In hindsight, it was a heartless thing to do, however, he knew the marginal benefit of keeping the bike was far less than the marginal benefit of a happy (pregnant) wife! He woke up the next morning to a knock at the front door, they drove all night from North Carolina to pick it up. This was about 15 years ago - but my husband still tells the story - to which the listener often says, 'and you're still married??' :) Since that time I've often purchased from eBay - and photos do matter. When there are fewer you immediately believe that there is something they are trying to exclude from view. The use of the rating system does help to weed out sellers who commit this practice frequently however, passing low value goods through deceptive selling, and eBay has gotten more savvy about their ranking system on the pages it seems in terms of sellers that are returned first in searches.ReplyDelete
Even on sites like CraigsList where you can meet with the seller to inspect/test the item before putting money down, photos are still an important part of screening posts for quality. When selling on the site, I've always tried to include plenty of detail around the product and quality photos to increase the chance of an item selling at a good value.ReplyDelete