at enables customers to purchase the item at a predetermined price and eliminate the bidding process. Buyers have a predefined period of time during which they may bid on items after which eBay validates if a bid exceeded the minimum price and the reserve. If the sale was successful according to these criteria, eBay notifies the buyer and seller through e-mail and they consummate the sale, including arranging for shipment and payment. At the time of the e-mail notification, eBay's involvement in the transaction is concluded. The site is not responsible for either payment or shipping (2001 Annual Report, 2002).
Buyers are not charged for bidding on an item, nor are they charged for having the successful bid at the end of an auction. Sellers are charged a placement fee based on the minimum starting price (the highest placement fee is $3.30 for a starting price of $50 or more). In addition, sellers can pay additional placement fees for special services, such as using boldface type on the site or being featured in the Featured Items section (2001 Annual Report, 2002).
When an auction is successful, eBay charges the seller a final value fee (the placement fee is charged regardless of whether or not the auction is successful). The final value fee is based on the final selling price, and is calculated as 5.25 percent of the first $25 of the price, plus 2.75 percent of the price from $25.01 to $1,000, and an additional 1.5 percent of the price over $1,000 (2001 Annual Report, 2002). Thus, the final value fee for an item that sells for $15 would be $0.79 (5.25 percent) and the final value fee for an item that sells for $500 would be $14.38. An item that sells for $10,000 would have a final value fee of $163.13.
Invoices are sent to sellers for all fees (placement and success) on a monthly basis; new sellers are required to have a credit card account on file with eBay (although payment does not have to be made through the credit...