eBay started with the basic auction service, but eBay has refined OAMs by creating a unique business model, with specific features that other OAMs do not offer. First of all, eBay makes money by helping buyers meet sellers, where individuals can advertise items that they would want to sell and buyers can contact the sellers directly. Sellers ship the items directly to the highest bidder. Then, to ensure an safe online auction environment (sellers are paid for what they sell), eBay has worked with Wells Fargo Bank to create it’s own online bill payment service, while most of the OAMs only use PayPal. In addition to consumers can buy or sell any items on eBay, this site also provides services such as auto insurance and financing, vehicle shipping, and professional services such as web design, accounting, writing, etc. However, there are some previously owned merchandise do not need to be sold in an auction format, eBay filled this gap by providing a fixed-price format, with the acquisition of Half.com. Another unique services that eBay offers is eBay Local Trading, the company has local sites in 60 markets in the U.S. So buyers pay low shipping rates by find items that are located near them. Most importantly, eBay has expanded to an international market. Instead let users from other countries bid on US auctions, eBay has created country-specific sites in many countries, and currently operating in eight of the top ten countries. All above reasons not only made eBay unique from the traditional retailer, but also gave eBay a chance to refine OAMs. Question 2:
In class we discussed four main theories related to failures of the market: Monopoly, Externalities, Information Asymmetries, and Incomplete Contracts. The last two are major failures that eBay did address. eBay solved those problems through following methods: powerful search system, feedback system, variety of payment methods, PayPal buyer protection, etc. The company makes money by matching buyers with...
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