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Pop Music and Internet Auctions

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. Outline. Introduction Data sources and summary statistics Empirical models Least squares regression, Censored normal regression

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Pop Music and Internet Auctions

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  1. 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

  2. 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)

  3. 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), • Dewanand Hsu (2004, OLS, probit, Tobit), • Dewallyand 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) …

  4. 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

  5. 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

  6. 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? • Is there a ‘death effect’ in online auctions? • How does ‘death effect’ vary across different price quanitles?

  7. Related literature (2010-2011)

  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 Jacksonwas 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 periodafter 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. Definitions of variables

  13. 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.

  14. 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

  15. 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

  16. 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).

  17. 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)

  18. 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

  19. 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’

  20. 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 newvinyl records

  21. 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

  22. 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

  23. 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

  24. Conclusions • Many thanks for your attention

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