Starting Prices in Liquidation Auctions for IT Equipment: Evidence from Field Experiments

Citation:

Elmaghraby, Wedad, Anandasivam Gopal, and Ali Pilehvar. “Starting Prices in Liquidation Auctions for IT Equipment: Evidence from Field Experiments.” Production and Operations Management (In Press, 2017).

Abstract:

It is widely accepted that the information technology (IT) industry has high clockspeed. This very phenomenon has led to IT OEMs finding themselves selling new generation models only to be left holding returned merchandise from older generations. Similarly, customers who migrate to newer generations of products experience uncertainty about how to dispose of older but functional IT equipment. Online liquidation markets have emerged to address these needs by finding ways to resell this equipment. On these liquidation markets, sellers of out-of-date or lightly used durable items like computers and tablets can transact with buyers interested in these products at discounted prices, without needing to alter the state/quality of the product. There is limited understanding of how these markets function and how they may be designed to increase their effectiveness. We report on a unique opportunity for a field experiment that was conducted through the co-operation of a large liquidation company (wholesale liquidator) for IT equipment in the United States. With the specific intention of understanding the design of these liquidation auctions, the research site allowed us to conduct a field experiment on their auction platform for different categories of iPad tablets. By manipulating auction starting prices, we are able to provide insight into the effect of starting prices on the final recovery rates of the returned IT products, and find evidence of cross-product dependencies. To the extent that efficient and viable liquidation markets have ecological and market value, our work provides insights into how sellers may, through the adjustment of starting prices, increase their recovery rates from online auctions.