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INBAL YAHAV WOLFGANG JANK R.H. SMITH SCHOOL OF BUSINESS, UNIVERSITY OF MARYLAND E-Loyalty Networks in Online Auctions
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Motivation Sellers Bidders Objective High profit High conversion rate Get the product ? Low price? Get the product Get the product (quality) Means Trust Feedback score Lit Auction design (e.g., open price, duration, etc.) IS THAT ENOUGH?? Actors
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Research Questions 1. How to define and measure e-loyalty? 3. What factors drive loyalty in online auctions? 2. How does loyalty impact auction outcome (price, conversion)?
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Data ~350 Sellers ~700 Repeating Buyers
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Loyalty in the Literature Definition: repeating purchases Brand-switch literature: Probability of switching to another brand Distribution of purchases across different brands (commonly 2 brands)
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Research Questions 1. How to define and measure e-loyalty? 3. What factors drive loyalty in online auctions? 2. How does loyalty impact auction outcome (price, conversion)?
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Define and Measure eLoyalty Three steps measurements Construct eLoyalty network Transform network into loyalty distribution Transform the distribution into quantifiers using PC analysis
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Define and Measure eLoyalty eLoyalty networks Bipartite graph with: First nodes set: sellers (red) Second node set: buyers (white) Arcs: purchases, with the width corresponding to the number of interactions
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Define and Measure eLoyalty eLoyalty disribution Sellers Buyers 100% 70% 80% 2.Measure the perceived loyalty per seller (~distribution of the weighted in-degree) 1.Measure proportion of interactions per buyer (~normalized distribution of out-degree) 30%
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Define and Measure eLoyalty Transform the distribution into two quantifiers (PC1, PC2) that measure the difference between the sellers perceived loyalty. m sellers (discrete grid) First & Second PCA Scores (~80% of the variation) Input PCA
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Sellers Perceived eLoyalty: PCAs Most weight on medium-scores PC2 contrasts the moderate loyalty distribution from the extremes – distinguishes sellers that have neither extremely loyal nor extremely disloyal bidders Very little weight on low scores, very large weight on high scores (between 0.8 and 1 PC1 contrasts distributions of sellers with extremely loyal bidders with those that are little loyal
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Research Questions 1. How to define and measure e-loyalty? 3. What factors drive loyalty in online auctions? 2. How does loyalty impact auction outcome (price, conversion)?
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Modeling eLoyalty : Effect of eLoyalty on Price OLS/ WLS regression High volume sellers have multiple, inter-dependent auctions Low-volume sellers have only few auctions Violates regression assumption
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Modeling eLoyalty : Effect of eLoyalty on Price Random-effects regression model Account for seller-specific variation Heteroscedasticity
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Modeling eLoyalty : Effect of eLoyalty on Price Segment sellers into three groups
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Modeling eLoyalty : Effect of eLoyalty on Price Segment sellers into three groups: model fit Low volumeMedium volume High volume R 2 =0.81 R 2 =0.77R 2 =0.83
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Effect of eLoyalty on Price The effect of loyalty depends strongly on size of the seller: High volume sellers can extract huge price-premiums from loyal bidders The impact of loyalty is much smaller for sellers of smaller scale CoefficientMedium volumeLow volumeHigh volume (Intercept)-0.2104 StartPrice0.080.040.05 AuctionDuration000 log(ItemQuantity)0.120.140.08 Bidcount0.110.130.07 log(Pieces)0.190.080.36 Size0.03 0.07 log(SellerFeedback)0.04 0.12 log(Volume)-0.040.01-0.81 PC10.21-0.242.74 PC20.02-1.72-15.41
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Summary Define and measure eLoyalty eLoyalty network Buyers loyalty ~ normalized distribution of out-degree Seller perceived loyalty ~ distribution of the weighted in- degree Transform the distribution into quantifiers using PC analysis Modeling eLoyalty: data segmentation Conclusions Loyalty has higher impact on high volume sellers Saturated market
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Discussion The analysis can be replicated to other products; the results might change Temporal networks Examine the evaluation of eLoyalty We did not observe temporal effect in our data
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More Information? Inbal Yahav iyahav@rhsmith.umd.edu http://www.rhsmith.umd.edu/faculty/phd/inbal/
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