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them o n eBay, where mo re users bid prices higher. Seco nd, any established seller leaving eBay wo uld give up their valuable “seller ratings,” and
wo uld need to build their Yaho o ! reputatio n f ro m scratch. Seller ratings represent a critical
switching co st, as many users view a high rating as a metho d f o r reducing the risk o f getting
scammed o r receiving lo wer-quality go o ds. Auctio ns wo rk best f o r dif f erentiated go o ds. While Amazo n has had so me success in peeling
away eBay sellers who pro vide co mmo dity pro ducts (a real danger as eBay increasingly relies
o n f ixed-price sales), eBay’s do minant share o f the o nline auctio n market still to wers o ver all
rivals.B. Sto ne, “Amid the Glo o m, an E-co mmerce War,” New Yo rk Times, Octo ber 12, 2008.
While there’s no magic in the servers used to create eBay, the early use o f techno lo gy allo wed
the f irm to create bo th netwo rk ef f ects and switching co sts—a dual strategic advantag...
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This document was uploaded on 01/31/2014.
- Winter '14