Using data from the eBay car auction market, we test several predictions regarding warranties, seller reputation and buyer experience in the determination of the final price. We find that the presence of a warranty generates a price premium, but that its magnitude decreases when the seller has a more established reputation. Compared to private sellers, professional dealers, who are ‘repeated-game players’ in the market, benefit less from a warranty and its substitutability for seller reputation is relatively small. In addition, a buyer with greater experience tends to pay less for a warranty or for a professional dealership.
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Economics and Econometrics