Reducing information asymmetry in the auctioning of non-perishable experience goods: The case of online wine auctions. (May 2020)

• Record Type: Journal Article
• Authors: Onur, Ilke; Bruwer, Johan; Lockshin, Larry
• Is Part Of: Journal of retailing and consumer services. Volume 54(2020)
• Publication Date: 2020-05
• Subjects: Online auction -- Non-perishable experience good -- Information asymmetry -- Wine -- Risk reduction -- Quantile regression; Retail trade -- Periodicals; Service industries -- Periodicals; Customer services -- Periodicals; Commerce de détail -- Périodiques; Service à la clientèle -- Périodiques; Customer services; Retail trade; Periodicals; 658.87
• DOI: 10.1016/j.jretconser.2020.102060
• Languages: English
• ISSNs: 0969-6989

Abstract

Abstract: We highlight the importance of reducing the perceived risk associated with information asymmetry for experience goods. We analyse a major online non-perishable experience good, wine, from the seller's perspective. The mechanism for lowering information asymmetry is the verification service offered by the auctioneer. By focusing on unsold items/lots, the wine and auction characteristics affecting the probability of a sale are identified. Results show that the verification of the wine's provenance increases the probability of sale by 5.7 percent and leads to an expected increase of 5.1 percent in the auction price. When both effects are combined, the increase in the expected revenue of the seller is 7.3 percent. We test and find no evidence of selection bias. Given the heterogeneity in wine prices, a quantile regression analysis shows how the results differ for high-priced wines compared to lower priced wines. Results highlight how the mechanisms to lower the degree of information asymmetry work both in attracting bidders to online auctions and encouraging bidders to submit higher bids.