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
1
Outline
Introduction
 Data sources and summary statistics
 Empirical models

◦
◦
◦
◦
Least squares regression,
Censored normal regression
Quantile regression
Censored quantile regression
Estimation results
 Conclusions (not ready)

2
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) …
3
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

4



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
5
Questions proposed
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?
1.
6
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
Cabral & Hortacsu
IBM Thinkpad/ , collectible
(2010)
coins(gold & proof) &
babies/$580, $50, $70 &
$10.7
Trautmann & Traxler Football Players at Hattrick/(2010)
Hammond (2010)
Compact discs/$10.74
Livingston (2010)
11,796 & 3,177/ probit,
Tobit & OLS
1053/ OLS (panel data)
364/ OLS & censored
normal regression
5009/ OLS
Taylor Made Firesole Irons & 4377 & 4394/ OLS
HALO video game/$393.31 &
$22.97
7
Author(s)
Items/mean prices
Observations/ Methods
Elfenbein & McManus charity auctions & non(2010)
charity auctions/$76.45 &
$78.25
Maier (2010)
16 items/ $8.04 ~ $613.26
7654 & 18347/ OLS &
probit
Sun (2010)
125/ OLS, censored
normal regression
Cherry fruits
5,648; 10,580/ GLS
8
Data sources


Item 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
9
Data sources
these 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

10
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
11
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 $5.
12
13
Definitions of variables
price
winning bid (second highest plus one increment)
bids
number of bids
bin (Buy It Now) dummy variable = 1, if an auction ended with 'Buy It Now'; = 0, otherwise
win
dummy variable = 1, if an item is sold; = 0, otherwise
score
positive scores minus negative scores
negative
negdummy
sellerpurchase
new
offthewall
negative scores received in a month
dummy = 1, if seller received negative score in a month; = 0, otherwise
dummy = 1, if seller has ever purchased an item on eBay; =0, otherwise
dummy variable = 1, if an album is brand new, ‘mint’ or never played; = 0,
otherwise
dummy variable = 1, if an album is 'Off the wall'; = 0, otherwise
thriller
bad
dangerous
dummy variable = 1, if an album is 'Thriller'; = 0, otherwise
dummy variable = 1, if an album is 'Bad'; = 0, otherwise
dummy variable = 1, if an album is 'Dangerous'; = 0, otherwise
history
bonus
dummy variable = 1, if an album is 'History'; = 0, otherwise
dummy variable = 1, if a bonus (poster, signature or single vinyl) is provided; = 0,
otherwise
dummy variable = 1, if an album is 'picture disc'; = 0, otherwise
picdisc
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quantity
overseas
question
Quantity available for sale in a listing
dummy variable = 1, if the item is available for international
shipping; =0, otherwise
Number of days: an auction listed after the death of Michael
Jackson
number of questions (raised by bidders) answered
opening
an opening bid set by sellers
shipping
Cost of handling and shipping
weekend
pics
dummy variable = 1, if an auction ends on Saturday or
Sunday; = 0, otherwise
dummy variable = 1, if credit card payment is available; = 0,
otherwise
number of pictures displayed on the webpage
bscore
buyer's scores (positive scores minus negative scores)
days
creditcard
15
Summary statistics
the album ‘thriller’ had the largest number of observations
(377/577 = 65%) and with a relatively low average price of
AUD$ 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.

16
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
17





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
18
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).

19
20
Empirical models

OLS regression
◦ Table 4

Censored normal regression
◦ Table 4

Quantile regression
◦ Table 5 (plus figure 4)

Censored quantile regression
◦ Table 6 (plus figures 5 & 6)
21
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

22
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’
23
Estimation results (OLS)
An increase of AUD$ 10 dollars in opening bid
raises the price by AUD$ 5.0
 prices 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

24
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

25
OLS
VARIABLES
bids
bin
ln(score+1)
ln(negative+1)
sellerpurchase
new
offthewall
bad
dangerous
history
(1)
(2)
price+shipping
2.947***
(8.09)
14.977
–12.559
(1.13)
(–0.92)
–0.043
–0.527
(–0.03)
(–0.37)
–3.102
–2.196
(–0.23)
(–0.16)
17.748
11.276
(1.63)
(1.00)
52.529***
15.462
(2.95)
(0.82)
3.107
8.414
(0.56)
(1.47)
–1.049
–1.279
(–0.17)
(–0.20)
135.714*** 164.779***
(10.01)
(12.38)
145.947*** 150.678***
(7.97)
(7.91)
censored normal regression
(3)
price+shippin
marginal
g
effects
27.348**
(2.02)
–0.561
(–0.41)
–9.558
(–0.77)
26.784***
(2.72)
44.050***
(2.62)
6.328
(1.10)
2.901
(0.46)
155.745***
(12.44)
175.994***
(9.71)
19.596*
[1.83]
–0.355
[–0.41]
–6.050
[–0.77]
15.063***
[3.10]
31.618**
[2.37]
4.096
[1.07]
1.856
[0.46]
141.119***
[11.43]
161.479***
[9.09]
26
picdisc
quantity
overseas
days
question
43.627***
(4.82)
27.557
(0.99)
–1.164
(–0.23)
–0.495***
(–4.26)
5.687
(1.37)
opening
weekend
–0.254
(–0.06)
creditcard
12.546
(0.67)
pics
1.100
(1.13)
ln(score+1)*new
–2.554
(–0.77)
ln(negative+1)*new –56.412*
(–1.81)
46.207***
(4.93)
–4.647
(–0.16)
4.276
(0.83)
–0.664***
(–5.64)
15.797***
(3.74)
0.502***
(6.12)
–3.587
(–0.78)
15.516
(0.80)
0.230
(0.23)
2.985
(0.87)
–47.696
(–1.47)
53.495***
(5.76)
–13.867
(–1.03)
6.399
(1.27)
–0.816***
(–7.17)
21.463***
(4.78)
0.015
(0.21)
–1.207
(–0.27)
29.630
(1.42)
0.415
(0.42)
–2.788
(–0.94)
–39.210
(–1.40)
40.962***
[5.04]
–8.777
[–1.04]
4.059
[1.27]
–0.517***
[–7.05]
13.586***
[4.70]
0.010
[0.21]
–0.763
[–0.27]
21.473
[1.27]
0.262
[0.42]
–1.765
[–0.94]
–24.819
[–1.41]
27
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
28
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

29
θ=
Variables
bids
bin
ln(score+1)
ln(negative+1)
sellerpurchase
new
offthewall
bad
dangerous
history
0.1
0.25
0.5
0.75
0.9
0.976***
(5.41)
19.609***
(5.56)
0.875
(0.87)
–5.856
(–0.71)
6.201
(1.03)
12.124
(1.24)
1.617
(0.53)
6.281*
(1.72)
66.922***
(9.17)
161.939***
(30.86)
1.309***
(8.56)
20.234***
(3.62)
0.741
(1.09)
–8.345
(–1.44)
3.998
(0.78)
14.765*
(1.86)
–0.891
(–0.34)
3.332
(1.20)
65.748***
(12.05)
150.577***
(28.55)
1.701***
(14.79)
18.823***
(5.14)
0.203
(0.47)
–2.930
(–0.71)
8.328**
(2.48)
40.303***
(7.45)
–0.584
(–0.34)
1.169
(0.61)
96.809***
(23.13)
178.099***
(32.88)
2.500***
(5.04)
30.378**
(2.25)
0.802
(0.47)
0.150
(0.01)
1.280
(0.10)
59.335***
(3.65)
2.258
(0.34)
–1.197
(–0.16)
192.167***
(11.84)
174.442***
(8.23)
3.136***
(6.63)
6.588
(1.07)
0.179
(0.13)
3.018
(0.30)
2.360
(0.24)
29.959**
(2.47)
4.736
(0.93)
8.538
(1.33)
319.449***
(19.97)
200.354***
(18.67)
30
bonus
15.540***
(4.43)
picdisc
29.944***
(5.40)
overseas
1.732
(0.57)
days
–0.481***
(–8.69)
question
8.850***
(3.72)
weekend
–1.880
(–0.72)
creditcard
–0.950
(–0.23)
pics
0.828*
(1.83)
ln(score+1)*new –0.252
(–0.14)
ln(negative+1)*new –39.191***
(–3.31)
11.114**
(2.10)
47.733***
(10.71)
1.348
(0.58)
–0.260***
(–5.49)
5.399***
(2.87)
0.566
(0.28)
15.111*
(1.80)
0.625
(1.45)
–0.824
(–0.52)
–32.023***
(–3.06)
9.359**
(2.14)
56.067***
(20.25)
1.383
(0.91)
–0.273***
(–7.51)
2.525*
(1.91)
–2.507*
(–1.81)
15.863***
(2.98)
0.972***
(3.13)
–3.908***
(–4.03)
–38.406***
(–4.26)
15.651
(0.87)
77.107***
(7.51)
–4.191
(–0.71)
–0.373***
(–2.76)
1.252
(0.22)
–0.563
(–0.10)
37.692***
(3.04)
1.823
(1.45)
–3.729
(–1.17)
–73.029***
(–2.85)
16.684***
(2.82)
57.207***
(5.44)
–9.943*
(–1.93)
–0.474***
(–4.54)
–14.629***
(–4.58)
10.073**
(2.37)
14.296**
(2.11)
3.598***
(5.29)
6.524***
(3.31)
–
113.256***
(–8.09)
31
32
33
34
Conclusions
 Many thanks for your attention
35