Do bidders compensate for shipping fees in online auctions?

Purpose - The purpose of this paper is to determine whether online bidders adjust their offers downward to compensate for shipping fees; whether shipping fees affect the number of bids in an auction, and thus indirectly influence winning bid prices; and whether experienced bidders more fully compensate for shipping fees, as compared to less experienced bidders. Design/methodology/approach - Data were collected from eBay, covering 530 auctions of 19-inch LCD monitors and 242 auctions of 1921 Morgan Dollar coins. Several regression models were employed to test the hypotheses. Findings - Shipping fees had a large, negative effect on winning bids in monitor auctions, but had no effect in coin auctions. Auctions with larger shipping fees resulted in fewer bids, which in turn lessened winning bid prices. Experienced bidders adjusted more fully than inexperienced bidders in monitor auctions, in which the fees are more substantial. Research limitations/implications - Data should be collected on additional product categories, and in order to control for background variables a controlled experiment should be conducted. Practical implications - Shipping fees appear to result in greater revenues for online sellers. Even though monitor bidders adjust their offers downward to compensate for fees, each additional $1 of shipping fee resulted in an additional $0.05 of profit for sellers. Coin sellers appear to have profited dollar for dollar from fees. Originality/value - Previous research has only indirectly examined the impact of shipping fees on winning bid prices. Given the dramatic growth of online auctions in the past decade, an examination of shipping charges is of both practical and theoretical importance.