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Unformatted text preview: e v iral pro mo tio n that in turn helped establish a new t he highend fas hion distributio n channel. s it e’ s s ales . When Even Free Isn’t Good Enough
Subsidizing ado ptio n af ter a rival has achieved do minance can be an uphill battle, and
so metimes even o f f ering a service f o r f ree isn’t eno ugh to co mbat the do minant f irm. When
Yaho o ! intro duced a U.S. auctio n service to co mpete with eBay, it initially didn’t charge sellers
at all (sellers typically pay eBay a small percentage o f each co mpleted auctio n). The ho pe was
that with the eliminatio n o f seller f ees, eno ugh sellers wo uld jump f ro m eBay to Yaho o !
helping the late-mo ver catch up in the netwo rk ef f ect game. But eBay sellers were reluctant to leave f o r two reaso ns. First, there weren’t eno ugh buyers o n
Yaho o ! to match the high bids they earned o n much-larger eBay. So me savvy sellers played an
arbitrage game where they’d buy items o n Yaho o !’s auctio n service at lo wer price...
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This document was uploaded on 01/31/2014.
- Winter '14