Pop Music and Internet Auctions

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Pop Music and Internet Auctions(NSC98~)

2014/10/18, 中正大學經濟系

Chia-Hung Sun Department of Economics,

National Chung Cheng University

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OutlineIntroduction Data sources and summary statisticsEmpirical models

◦ Least squares regression,◦ Censored normal regression ◦ Quantile regression ◦ Censored quantile regression

Estimation results Conclusions (not ready)

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Introduction An examination of the value of seller reputation forms

the basis for empirical tests of asymmetric information in recent empirical papers; for example, see ◦ McDonald and Slawson (2002, seemingly un-related regression), ◦ Dewan and Hsu (2004, OLS, probit, Tobit), ◦ Dewally and Ederington (2006, Tobit, Heckman's sample

selection, probit), ◦ Lucking-Reiley, Bryan, Prasad, and Reeves (2007, censored

normal regression), ◦ Livingston (2010, OLS, probit) ◦ Hendricks et al. (2012, OLS, 2SLS) …

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How about memorabilia? Ursprung and Wiermann (2011) the death effect is

indeed ‘negative’ for artists who are dying young Reputation effect diminishes with increasing age

at death, with the consequence that the traditional positive scarcity effect governs the price changes observed after the death of artists who die at a ripe age after having gained the reputation which they deserve

the work of top-artists is subject to more pronounced death effects than the work of merely accomplished artists, and the work of journeymen artists is even less affected

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Matheson and Baade (2004) that the price of celebrity memorabilia rises around the time of that person’s death.

Previous authors attribute this “death-effect” primarily to expectations on the part of collectors concerning the future supply of collectibles about the public figure as in the case of a durable goods monopolist

Our observations of the sports memorabilia market suggest that the increase in prices is instead due to a “nostalgia effect” (鄉愁、懷舊之情 ) as a result of the media attention that surrounds the death of a prominent public figure

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Questions proposed1. fans were eagerly looking for his memorabilia

in online auctions and prepared to pay for whatever they could afford, seller’s reputation still matter?

2. Is there a ‘death effect’ in online auctions? 3. How does ‘death effect’ vary across different

price quanitles?

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Related literature (2010-2011)Author(s) Items/mean prices Observations/ Methods

Lewis (2011) 18 models of vehicle/ $11,110

82538/ IV, OLS, hedonic regressions

Simonsohn (2010) Single & multiple DVDs/ $10.16 & $55.92

11,796 & 3,177/ probit, Tobit & OLS

Cabral & Hortacsu (2010)

IBM Thinkpad/ , collectible coins(gold & proof) & babies/$580, $50, $70 & $10.7

1053/ OLS (panel data)

Trautmann & Traxler (2010)

Football Players at Hattrick/- 364/ OLS & censored normal regression

Hammond (2010) Compact discs/$10.74 5009/ OLS

Livingston (2010) Taylor Made Firesole Irons & HALO video game/$393.31 & $22.97

4377 & 4394/ OLS

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Author(s) Items/mean prices Observations/ Methods

Elfenbein & McManus (2010)

charity auctions & non-charity auctions/$76.45 & $78.25

7654 & 18347/ OLS & probit

Maier (2010) 16 items/ $8.04 ~ $613.26 5,648; 10,580/ GLS

Sun (2010) Cherry fruits 125/ OLS, censored normal regression

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Data sourcesItem of interest: five studio albums of vinyl long

play records (vinyl) by Michael Jackson (August 29, 1958 – June 25, 2009); these are ‘bad’, ‘thriller’, ‘off the wall’, ‘dangerous’ and ‘history’

the quote from Wikipedia states: Michael Joseph Jackson was an American singer-songwriter, entertainer, dancer, arranger, music producer, choreographer, actor, businessman, musician, and philanthropist. Often referred to as the ‘King of Pop’, or by his initials MJ Jackson is recognized as the most successful entertainer of all time by Guinness World Records

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Data sourcesthese vinyl records to some extent can be

considered as collectables, irrespective of used or brand new; bidders pay close attention to the information provided, including seller’s reputation, descriptions or even pictures

the relatively homogeneous nature of the music records allows for the analysis

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collected by hand from eBay Australia the overall sample period was 88 days starting

from 8 July 2009 to 4 October 2009 (two weeks cooling period after Michael Jackson pass away)

total sample size is 577, ◦ 360 successful auctions◦ 217 auctions with no bids or below reserved price◦ excluded: 11 auctions with incorrect descriptions◦ On July 8th, there were 76 music records of Michael

Jackson, but only 13 of them were vinyl

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Cooling period? Jackson's ‘Thriller’: $1,225 on eBay, $4.99

in Seattle◦ Michael Jackson hadn’t been pronounced dead yet Thursday

when the first person walked into Golden Oldies wanting a copy of “Thriller.” The longtime Wallingford record and music store had 55 copies on vinyl, selling for $4.99. All were gone within two days. About two dozen vinyl copies of “Off the Wall” went for $3.99.

◦ Owner Dean Silverstone, who I wrote about in a 2007 business profile, said he’s heard stories of “Thriller” selling for $60, and unopened copies selling for $1,200. But he says it shouldn’t be sold for more than $5.

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Definitions of variables price winning bid (second highest plus one increment) bids number of bidsbin (Buy It Now)

dummy variable = 1, if an auction ended with 'Buy It Now'; = 0, otherwise

win dummy variable = 1, if an item is sold; = 0, otherwisescore positive scores minus negative scores

negative negative scores received in a monthnegdummy dummy = 1, if seller received negative score in a month; = 0, otherwise sellerpurchase dummy = 1, if seller has ever purchased an item on eBay; =0, otherwise new dummy variable = 1, if an album is brand new, ‘mint’ or never played; = 0, otherwise offthewall dummy variable = 1, if an album is 'Off the wall'; = 0, otherwise

thriller dummy variable = 1, if an album is 'Thriller'; = 0, otherwisebad dummy variable = 1, if an album is 'Bad'; = 0, otherwisedangerous dummy variable = 1, if an album is 'Dangerous'; = 0, otherwise

history dummy variable = 1, if an album is 'History'; = 0, otherwisebonus dummy variable = 1, if a bonus (poster, signature or single vinyl) is provided; = 0,

otherwise picdisc dummy variable = 1, if an album is 'picture disc'; = 0, otherwise

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quantity Quantity available for sale in a listing overseas dummy variable = 1, if the item is available for international

shipping; =0, otherwise

days Number of days: an auction listed after the death of Michael Jackson

question number of questions (raised by bidders) answered

opening an opening bid set by sellers

shipping Cost of handling and shipping

weekend dummy variable = 1, if an auction ends on Saturday or Sunday; = 0, otherwise

creditcard dummy variable = 1, if credit card payment is available; = 0, otherwise

pics number of pictures displayed on the webpage

bscore buyer's scores (positive scores minus negative scores)

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Summary statistics the album ‘thriller’ had the largest number of observations

(377/577 = 65%) and with a relatively low average price of AUD$ 46.1.

The rareness of the two albums also reflected in the number of bids received because the ‘dangerous’ album, had the highest number of bids of 19.42, followed by 17.17 of the ‘history’ album.

The sellers for the ‘history’ album had the highest average score of 2531.5, in contrast to the ‘dangerous’ album with the lowest score of 769.8 on average. The seller with the highest score had 16,476, but there were several ‘zero reputation’ sellers who successfully sold their albums except for sellers in the ‘dangerous’ album.

Summary statistics Of the 360 successful auctions, the average price was $55.23

Australian dollars (AUD) the exchange rate for Australian dollar against U.S. dollar

fluctuated substantially ranging from 0.7745 to 0.8801 in three-month period, and the average exchange rate was 0.8367.

The highest price of vinyl records was one of the ‘dangerous’ albums recorded at AUD$ 510 and the lowest price was just for AUD$ 0.99.

The ‘history’ album had the highest average price of AUD$ 231.6, followed by the ‘dangerous’ album of AUD$ 227.2.

The main reason for such high prices was the rareness of these two albums. They were recorded in 1995 and 1991

the average score for overall sellers was 1052, the negative score on average was as low as 0.07

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The mean opening bid in successful auctions was AUD$ 23.4, including the highest and lowest opening bids of AUD$ 250 (thriller) and $ 0.01.

In contrast, the average opening bid in the overall sample was AUD$ 49.3, which indicates many auctions with a relatively high opening price did not attract any bids.

There were 24 auctions with an opening bid greater than AUD$ 250 (ranging from AUD$ 299 to 1500), but all of them were unsold.

The used vinyl records accounted for nearly 81% of total sales, and

more than 90% of the sellers have ever purchased items on eBay, indicated by variable, sellerpurchase

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Picture disc vinyl records had only about 8.8%

of the auctions. In terms of payment methods, the use of credit

cards was unpopular at the time on eBay Australia, accounting for less than 2%.

the success rates of auctions for these five albums differ, from the lowest rate of 40.0% (history) to the highest rate of 76.67% (off the wall).

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Empirical modelsOLS regression

◦Table 4 Censored normal regression

◦Table 4Quantile regression

◦Table 5 (plus figure 4) Censored quantile regression

◦Table 6 (plus figures 5 & 6)

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Estimation results (OLS) this study includes four dummies in the regression

except for the ‘thriller’ album it shows that an additional bid increase the auction

price by AUD $2.947 Auctions ended with ‘buy it now’ do not generate a

significant price increase. Surprisingly, seller reputations (both positive and

negative scores) no statistically significant impact on prices

brand new (new) vinyl records on average are statistically and significantly sold at higher price of AUD$ 52.53

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Estimation results (OLS) the prices of the ‘dangerous’ and ‘history’ albums are

considerably affected by fewer quantity supplied and their prices are much higher than the ‘thriller’ one by AUD$ 135.7 and $146.0

the prices of the ‘off the wall’ and ‘bad’ albums are statically equal to the ‘thriller’ one

Similar to the finding of Frick and Knebel (2007), the prices statistically and significantly drop over time, measured by variable ‘days’ (number of days after Michael Jackson’s death) by about AUD$ 0.50.

Model (2) replaces the variable ‘bids’ with ‘opening’

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Estimation results (OLS)An increase of AUD$ 10 dollars in opening bid

raises the price by AUD$ 5.0prices increases by AUD$ 16 higher if answering

one more question for bidders The significance of the interaction term

‘ln(negative +1)*new’ coefficient in Model (1) suggests seller’s negative reputation has a significantly detrimental impact only on the prices of new vinyl records

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Estimation results (censored normal)

‘buy it now’ become statistically significant and this outcome is in line with Chen et al. (2013)

seller’s buying experience denoted by the variable sellerpurchase increases the prices by AUD$ 15 because such an experience will sharpen seller’s listing and selling skills

brand new, picture disc, answering questions and days after the death remain statistically significant

number of pictures, credit card payment, weekend sales, international shipping, bonus, and quantity continue to be statistically insignificant

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OLS censored normal regression

(1) (2) (3)VARIABLES price+shipping price+shippin

gmarginal effects

bids 2.947*** (8.09) bin 14.977 –12.559 27.348** 19.596* (1.13) (–0.92) (2.02) [1.83]ln(score+1) –0.043 –0.527 –0.561 –0.355 (–0.03) (–0.37) (–0.41) [–0.41]ln(negative+1) –3.102 –2.196 –9.558 –6.050 (–0.23) (–0.16) (–0.77) [–0.77]sellerpurchase 17.748 11.276 26.784*** 15.063*** (1.63) (1.00) (2.72) [3.10]new 52.529*** 15.462 44.050*** 31.618** (2.95) (0.82) (2.62) [2.37]offthewall 3.107 8.414 6.328 4.096 (0.56) (1.47) (1.10) [1.07]bad –1.049 –1.279 2.901 1.856 (–0.17) (–0.20) (0.46) [0.46]dangerous 135.714*** 164.779*** 155.745*** 141.119*** (10.01) (12.38) (12.44) [11.43]history 145.947*** 150.678*** 175.994*** 161.479*** (7.97) (7.91) (9.71) [9.09]

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picdisc 43.627*** 46.207*** 53.495*** 40.962*** (4.82) (4.93) (5.76) [5.04]quantity 27.557 –4.647 –13.867 –8.777 (0.99) (–0.16) (–1.03) [–1.04]overseas –1.164 4.276 6.399 4.059 (–0.23) (0.83) (1.27) [1.27]days –0.495*** –0.664*** –0.816*** –0.517*** (–4.26) (–5.64) (–7.17) [–7.05]question 5.687 15.797*** 21.463*** 13.586*** (1.37) (3.74) (4.78) [4.70]opening 0.502*** 0.015 0.010 (6.12) (0.21) [0.21]weekend –0.254 –3.587 –1.207 –0.763 (–0.06) (–0.78) (–0.27) [–0.27]creditcard 12.546 15.516 29.630 21.473 (0.67) (0.80) (1.42) [1.27]pics 1.100 0.230 0.415 0.262 (1.13) (0.23) (0.42) [0.42]ln(score+1)*new –2.554 2.985 –2.788 –1.765 (–0.77) (0.87) (–0.94) [–0.94]ln(negative+1)*new –56.412* –47.696 –39.210 –24.819 (–1.81) (–1.47) (–1.40) [–1.41]

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Empirical results (quantile reg.) number of bids (bids) is strongly associated with prices

at all quantiles, the estimated coefficient exhibit an increasing trend as the auction prices increase, starting from 0.976 to 3.136

Except at the 0.9 quantile, ‘buy it now’ has a positive and significant effect on all price quantiles

the coefficient estimates of reputation variables remain statistically insignificant

Brand new vinyl records, as expected, enjoy a price premium for all quantiles, and a higher price increase of AUD$ 59.3 at the 0.75 qauntile. But, for low price at the 0.1 quantile, there is no price difference between brand new and used vinyl records

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Answering question helps increase the prices except at the 0.9

quantile, which generates a significantly negative effect on price

Contrast to the literature, the estimated coefficient of ln(score+1)*new is –3.908; that is, a 10% in reputation score will decrease the price of new records by AUS$ 0.391. Such a finding is totally unexpected, and this study uses Figure 4 to explain why it occurs

the median price (at the 0.5 quantile) for new vinyl records is AUD$ 44.80, and the average reputation score for sellers who sold the records at a median price is 3,331

several highly reputable sellers tend to sell their new vinyl records at a relatively low price, which, of course, will raise auction success rate and maximize their revenue

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0.1 0.25 0.5 0.75 0.9

Variables bids 0.976*** 1.309*** 1.701*** 2.500*** 3.136*** (5.41) (8.56) (14.79) (5.04) (6.63)bin 19.609*** 20.234*** 18.823*** 30.378** 6.588 (5.56) (3.62) (5.14) (2.25) (1.07)ln(score+1) 0.875 0.741 0.203 0.802 0.179 (0.87) (1.09) (0.47) (0.47) (0.13)ln(negative+1) –5.856 –8.345 –2.930 0.150 3.018 (–0.71) (–1.44) (–0.71) (0.01) (0.30)sellerpurchase 6.201 3.998 8.328** 1.280 2.360 (1.03) (0.78) (2.48) (0.10) (0.24)new 12.124 14.765* 40.303*** 59.335*** 29.959** (1.24) (1.86) (7.45) (3.65) (2.47)offthewall 1.617 –0.891 –0.584 2.258 4.736 (0.53) (–0.34) (–0.34) (0.34) (0.93)bad 6.281* 3.332 1.169 –1.197 8.538 (1.72) (1.20) (0.61) (–0.16) (1.33)dangerous 66.922*** 65.748*** 96.809*** 192.167*** 319.449*** (9.17) (12.05) (23.13) (11.84) (19.97)history 161.939*** 150.577*** 178.099*** 174.442*** 200.354*** (30.86) (28.55) (32.88) (8.23) (18.67)

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bonus 15.540*** 11.114** 9.359** 15.651 16.684*** (4.43) (2.10) (2.14) (0.87) (2.82)picdisc 29.944*** 47.733*** 56.067*** 77.107*** 57.207*** (5.40) (10.71) (20.25) (7.51) (5.44)overseas 1.732 1.348 1.383 –4.191 –9.943* (0.57) (0.58) (0.91) (–0.71) (–1.93)days –0.481*** –0.260*** –0.273*** –0.373*** –0.474*** (–8.69) (–5.49) (–7.51) (–2.76) (–4.54)question 8.850*** 5.399*** 2.525* 1.252 –14.629*** (3.72) (2.87) (1.91) (0.22) (–4.58)weekend –1.880 0.566 –2.507* –0.563 10.073** (–0.72) (0.28) (–1.81) (–0.10) (2.37)creditcard –0.950 15.111* 15.863*** 37.692*** 14.296** (–0.23) (1.80) (2.98) (3.04) (2.11)pics 0.828* 0.625 0.972*** 1.823 3.598*** (1.83) (1.45) (3.13) (1.45) (5.29)ln(score+1)*new –0.252 –0.824 –3.908*** –3.729 6.524*** (–0.14) (–0.52) (–4.03) (–1.17) (3.31)ln(negative+1)*new –39.191*** –32.023*** –38.406*** –73.029*** –

113.256*** (–3.31) (–3.06) (–4.26) (–2.85) (–8.09)

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Conclusions

Many thanks for your attention