INTRODUCTION :

headquartered in San Jose, California eBay was founded in September 1995 by Pierre Omidyar (Pierre), a software developer. Earlier, he had worked in Claris, a spin-off of the famed Apple Computers the first product that it sold was a broken laser pointer Pierre, a French-born Iranian-American, acknowledged that he alone cannot put eBay into the corporate big leagues. In 1996, Jeffrey Skoll, with a MBA from Stanford, was hired. Soon in 1998, Meg Whitman (Meg), a Harvard Business School graduate, followed as the president and CEO. Meg had learned the crucial importance of branding from her enriched association with Hasbro, a worldwide leader in childrens and family leisure time products and services. She took the company public (Exhibit I), expanded it and successfully exceeded earnings predictions.
Exhibit I eBays IPO Information Date went Public Proposed Offer Price Actual Offer Price First Day Open First Day Close Shares Offered (million) Offering Amount (million) Underwriters September 24th 1998 $14.00- $16.00 $18.00 $53.50 $47.38 3.50 $62.8 Goldman, Sachs & Co.

Compiled by the author from: eBay reignites IPO market with 197% surge at opening, http://fmdarticles.com/p/articles/ mi_m0CGN/is_n192/ai_21160806, September 25 th 1998

Meg created an experienced management team by gathering her senior staff from companies such as Pepsico and Disney, and built a strong vision for the company. eBay intended to be a company that is in the business of connecting people.

eBay has three business segments: Marketplaces, Payments and Communications

Marketplace Segment

The Marketplaces segment of eBay comprises online commerce platforms that

allow buyers and sellers to interact and trade with one another globally The Marketplaces segments core online commerce platform is eBay.com and its local counterparts are in 39 countries. Its adjacent platforms consist of eBays classifieds website, as well as Half.com, Rent.com, Shopping.com and StubHub. The revenue for eBays Marketplaces platforms are raised from the fee paid by sellers for listing, feature, subscription and final value fee. Apart from this, there are lead referral fee, transaction fee, advertising fee, etc., which act as the source of revenue.

Bought Half.com, which had fixed price model, because eBay(had floating price auction model) thought they could be threat to them. eBay introduced fixed-price option to its auction listings with items with a Buy It Now logo, which can be bought immediately for a set price eBays classifieds website are designed to help people meet, share ideas and trade on a local level, and are available in lot of cities and regions ofthe world Rent.com concerning rental-housing industry is a US listing website, aimed at bringing together apartment seekers and apartment managers

Shopping.com, which features products from thousands of merchants across the Internet, is a comparison shopping destination

StubHub is a US ticket marketplace, which facilitates fans to buy and sell tickets of various sports, entertainment events, etc.

Payment Segment eBays Payments segment, PayPal, allows individuals and businesses to send as well as receive payments online In November 2008, eBay acquired US-based online payments business, Bill Me Later. Communication Segment Skype Technologies S.A. (Skype), enables Voice over Internet Protocol (VoIP) communications and offers low-cost connectivity to traditional fixed- line and mobile telephones.

eBay and Perfect Competition eBay is a place to buy, sell and window-shop there are large numbers of buyers on eBay. Individual seller, small retailer, or a big company - anyone can sell nearly anything by listing their items on eBay, if they are flexible enough regarding the price eBays global approach ensures sale ability of unusual items that arent in demand in their vicinity. As huge variety of things are available with enormous details like what each one sold or is selling for, photos, detailed descriptions, owner experiences, etc.

there is no possibility for economies of scale, which has the potential to turn the largest firm into a monopoly.( At eBay, transaction by individual buyer and seller is very small compared to the total volume of transactions. Both buyers and sellers at eBay are price takers. No individual buyer and seller can do anything to change that price. The eBay user agreement limits each user to 10 simultaneous listings for identical goods)

MarketPlaces As of December 31st 2008, eBays Marketplaces had around 86.3 million active users globally. On eBay, every second, $2,000 worth of goods are traded by users across the world. In Q4-2008, 732 million new listings were added to eBay.com worldwide. About 113 million existing listings are available on eBay worldwide, and approximately 7.1 million additional listings per day, are freshly included Competitive Market In the eBay market, competitive advertising does not occur because the products are categorised and sub-categorised into homogeneous ones. Competitive advertising would be simply redundant. However, generic advertising bereft of brand names, benefiting the industry as a whole, often does occur. Though within the different categories of goods available there are subcategories where the items are homogeneous, product differentiation is inherent in used goods. Goods are differentiated by wear

How Charges are applied No cost is entailed for browsing and bidding on auctions, but sellers are to pay two kinds of charges. In order to list an item on eBay, a non-refundable insertion fee is charged. For optional upgrades to boost the listing - such as premium picture services and format enhancements through bold subtitles and highlighting - additional charges are levied. These are included in the insertion fee. A final value fee is charged if the listing ends with a winning bid. No final value fee is charged if there are no bids on an item, or if the reserve price is not met. eBay fee schedule ensures identical selling costs for all sellers. Shipping and handling charges, signifying the travel costs generally differ depending on the good. However, in some instances, travel costs are cheaper than local sales taxes. Auctions under eBay, however, can be highly unpredictable instigating strange buyer behaviour. In 43% of the auctions, the bidders apparently paid more than the buy it now price. Such buyer behaviour as bidders curse. The Romans term it as calor licitantis meaning bidders heat.

eBay simulates many important features of perfect competition like large number of buyers and sellers, information symmetry, low barriers to entry and sub-categorisation of products on the basis of homogeneity. eBay is often cited as an eminently apt real world example of a perfectly competitive market. However, critics point out that products subcategorised on the basis of homogeneity are strictly not homogenous products because of variation in period of original use as well as degree of wear and tear. Moreover, the products transacted under eBay do not affect resource allocation, the way the products usually do when they are produced to address the original demand. Prices, therefore, do not truly dictate the supply of products listed on eBay. While there are all these hairsplitting nobody has come up with a better instance of perfect competition that would comprise a host of items touching modern life.