ANALYZING MANAGERIAL DECISIONS: eBay*

eBay operates the world's largest online auction. In early 2008, eBay operated in 39 counties with 276 million registered users worldwide. The total value of all successfully closed items in 2007 was $59 billion with an average of $2,039 worth of goods trading on the site every second. Sellers pay a small fee to eBay to list their items. They provide a description of the item, photographs, the minimum acceptable bid, accepted forms of payment, and other relevant information. Items can be sold at a fixed price or through an auction. In an auction, bidders submit electronic bids over the Internet. After the auction closes (auctions usually last several days), the high bidder receives an e-mail. The high bidder must contact the seller within three business days to claim the item and arrange payment and delivery. eBay provides other support services:

• The Feedback Forum is a place where eBay users leave comments about each other's buying and selling experiences. If you are a bidder, you can check the seller's Feedback Profile easily before you place a bid to learn the other buyers' experience. If you're a seller, you can do the same thing to check out buyers. Each participant is given a Feedback based on the number of positive and negative ratings that they have received. Participants with sufficient positive ratings are flagged by colored stars. The highest rating is the "Red shooting star." eBay has created a set of policies to guard against "feedback manipulation" and "feedback abuse."

• eBay users are encouraged to settle transactions through PayPal. PayPal provides free insurance of up to $2,000 on some items to protect buyers in cases where they do not receive the item or it was less than expected.

Participants sign user agreements that specify the trading rules and expectations. eBay's staff investigates alleged misuses at eBay such as fraud, trading offenses, and illegally listed items. Potential resolutions include things as banning a person from future trading on eBay.

1. How does eBay create value?
2. What potential contracting problems exist on eBay?
3. How does eBay address these problems?
4. What are the contracting costs at eBay?
5. eBay claims that it has only a small problem with fraud and misuse of the system. Does this imply that it is overinvesting in addressing
potential contracting problems? Underinvesting? Explain.

*To obtain more detailed information, All assignments must be completed as Word documents. If you do not have Word you can use Microsoft WordPad and use the rich text format (.rtf extension)

•All assignments must be prepared in the APA format, including references.
•Cover page.Use a single cover page that contains the title of the assignment and your name.
•Margins.All page margins should be the default margins for your word processing program. Use only the LEFT margin justification setting.
•Page numbering.Please use page numbering for all pages except the cover page.
•Spacing/Font.All papers should be single spacedonly (this includes spacing between paragraphs) and a 12 point font.
•Direct quotes/ paraphrasing.Direct quotes and paraphrasing MUST be referenced and cited using APAguidelines.

Although there is no limit on how many citations are in the paper, there is a limit of 15% for quotations and 25% for unoriginal wording for this course. When more than one quarter of a paper seems to be unoriginal, it usually indicates a problem. Even if sources are properly cited and some of the words are changed, it raises the question of how much original thinking went into the paper. There is a big difference between starting with a blank page and writing your own thoughts, and building the paper around quotes, paraphrased sources, and the altered wording of another author. You are encouraged to use textbook concepts as you attempt to explain in your own words the answers to the assignments rather than relying heavily on quoted material. Try to think about how you would explain your answer to someone who has not taken a managerial economics class. High scores on the originality report in Turnitin.com are not just a result of plagiarism; they can also result from an incorrect quotation/citation methodology or from using words that have been rearranged from your sources. If you use someone else's work you must cite and reference it appropriately.

•References

You must include a separate References page in APA format with each paper. Any source that is used to develop your paper must be included in this section.

Text Book: Managerial Economics and Organizational Architecture by JAMES A. BRICKLEY, CLIFFORD W. SMITH and JEROLD L. ZIMMERMAN, Sixth Edition. ISBN 978-0-07-352314-9.