Paper ID
3380
Description
Mobile phones are popular products in secondary markets, but tend to carry residual quality uncertainty from their first life. This uncertainty reduces their prices in secondary market auctions, where bidders face an adverse selection problem. We, thus, examine how the open versus closed status of mobile phones affects their final prices, with a view to estimating the costs of jailbreaking in this market. We also study how final prices are affected when no information on the status of the devices is provided. We find that bidders bid lower for open phones when there is a risk of jailbreaking. However, when this uncertainty is removed, prices reflect those seen in the primary market. Our work has significant implications for secondary market auctioneers and mobile device makers, in terms of enhancing the efficiency of secondary markets. We also contribute to the literature on platforms by studying the tradeoffs inherent in platforms openness.
Recommended Citation
Alhauli, Abdullah; Gopal, Anand; and Elmaghraby, Wedad, "Open Versus Closed? On the Effects of Mobile Phone Platform Openness in B2B Secondary Market Online Auctions" (2019). ICIS 2019 Proceedings. 14.
https://aisel.aisnet.org/icis2019/sustainable_is/sustainable_is/14
Open Versus Closed? On the Effects of Mobile Phone Platform Openness in B2B Secondary Market Online Auctions
Mobile phones are popular products in secondary markets, but tend to carry residual quality uncertainty from their first life. This uncertainty reduces their prices in secondary market auctions, where bidders face an adverse selection problem. We, thus, examine how the open versus closed status of mobile phones affects their final prices, with a view to estimating the costs of jailbreaking in this market. We also study how final prices are affected when no information on the status of the devices is provided. We find that bidders bid lower for open phones when there is a risk of jailbreaking. However, when this uncertainty is removed, prices reflect those seen in the primary market. Our work has significant implications for secondary market auctioneers and mobile device makers, in terms of enhancing the efficiency of secondary markets. We also contribute to the literature on platforms by studying the tradeoffs inherent in platforms openness.