When the stock jumps well beyond the proposed acquisition price (to $18.82), that's a solid indication that the offer isn't going to cut it. One would normally expect a jump in price upon the announcement of a buyout offer at a premium, but typically the price will jump to some intermediate value between the previous market price and the offer price, in effect discounting for the chance that the deal will fall apart. Here the market response went well beyond that. Now the question is, will we see a bidding war? And with whom?
That's difficult to say without more information. It is possible that it could hurt them if the loss (of auction commissions) from sending buyers to other sites exceeds the gains from advertising revenue, but it is also possible that the advertising revenue will exceed the loss of auction commissions. Empirical information is needed before one could say one way or another. If all that we have to work with are intuitions, we are facing an intractable "debate" that will go nowhere.
E-Bay auction services have been lauded from the beginning as approximating as nearly as possible a perfectly competitive market. Competition, keep in mind, at least in the American model, is not for the benefit of sellers and suppliers, but rather is to the benefit of consumers, maximizing consumer surplus by creating price competition. To the extent that Google ads increase this competition, they realize the end that made E-Bay so great in the first place. Presumably, to whatever extent Google ads do drive people away from E-Bay auctions it is because they are not competitive, and this is a good thing for consumers and for the market.
The only thing that really cuts against this is that ads could be misleading or customers could be distracted from finding a competitive auction. On the first point, however, there are already laws that address that problem. And on the second, the auction model itself assumes the existence of personal responsibility enough that we shouldn't have to be paternalistic about people getting distracting and not looking out for themselves. Finally, to whatever extent someone forgoes a competitive auction for a higher fixed price through an ad, that can be explained by the consumer's preference for immediacy or for saving time, both of which are legitimate preferences.
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When the stock jumps well beyond the proposed acquisition price (to $18.82), that's a solid indication that the offer isn't going to cut it. One would normally expect a jump in price upon the announcement of a buyout offer at a premium, but typically the price will jump to some intermediate value between the previous market price and the offer price, in effect discounting for the chance that the deal will fall apart. Here the market response went well beyond that. Now the question is, will we see a bidding war? And with whom?
That's difficult to say without more information. It is possible that it could hurt them if the loss (of auction commissions) from sending buyers to other sites exceeds the gains from advertising revenue, but it is also possible that the advertising revenue will exceed the loss of auction commissions. Empirical information is needed before one could say one way or another. If all that we have to work with are intuitions, we are facing an intractable "debate" that will go nowhere.
Agreed. And typically the source will be more easily traceable for legal purposes, provided that the seller is not foreign.
E-Bay auction services have been lauded from the beginning as approximating as nearly as possible a perfectly competitive market. Competition, keep in mind, at least in the American model, is not for the benefit of sellers and suppliers, but rather is to the benefit of consumers, maximizing consumer surplus by creating price competition. To the extent that Google ads increase this competition, they realize the end that made E-Bay so great in the first place. Presumably, to whatever extent Google ads do drive people away from E-Bay auctions it is because they are not competitive, and this is a good thing for consumers and for the market.
The only thing that really cuts against this is that ads could be misleading or customers could be distracted from finding a competitive auction. On the first point, however, there are already laws that address that problem. And on the second, the auction model itself assumes the existence of personal responsibility enough that we shouldn't have to be paternalistic about people getting distracting and not looking out for themselves. Finally, to whatever extent someone forgoes a competitive auction for a higher fixed price through an ad, that can be explained by the consumer's preference for immediacy or for saving time, both of which are legitimate preferences.