Courses/Computer Science/CPSC 203/CPSC 203 2007Fall L04/CPSC 203 2007Fall L04 TermProjects/eBay: The Future of the Black Market

= The Black Marketeers =



Group Members:
 * Patrick Ryan
 * Olga Trailina
 * Janaye Henderson
 * Bao Tran Diep
 * Michael Gilday-Palin

Project Statement
Our group will be exploring the impact on the eBay market with the introduction of highly demanded products, such as Playstation 3, XBox 360, and the Apple iPhone.

Argument

 * Introduction to Supply and Demand -- When demand exceeds supply in the real world, people turn to the internet to find the products they want to buy at any cost.


 * A Good Thing Gone Bad -- The positive side of eBay quickly turns to bidding war.


 * Making a Quick Buck -- Opportunistic entrepreneurs take advantage of runaway demand by selling popular products at obscene prices.


 * Extreme Examples -- Some examples to show how people can sell anything at any price on ebay. Example : XBox 360 game consoles were selling for up to $10,400.00 US and sellers were making up to 2,600% profit.


 * What is eBay Doing to Stop Enormous Price Increases? -- Investigation is required...

The Invisible Hand
In a market system of economics, such as the one that we enjoy in North America, the price and availability of goods are directly influenced by the laws of Supply and Demand. These laws essentially allow consumers to regulate the price of goods by "voting" with their dollar. Popular products will be priced competitively against similar products so that the consumer (you) will purchase them, instead of the competition. This regulation of prices by the market is sometimes referred to as The Invisible Hand.

The more a product is purchased by the consumer, the more products will be made available by the producer. This is how the demand for a product directly affects its supply.

It is also true that as more products are made available by the producer, the more of them will be purchased by the consumer. This is how the supply of a product affects its demand.

That said, the demand and supply of a product can directly affect its price and impact on the consumer's wallet.

For example, if demand is low (consumers are not purchasing many of a product) and supply is high (producers are producing many units of a product), the price of this product will be lowered to encourage sales. This is especially important if the product is perishable. If the demand for apples is low and supply is high, the price will be lowered to encourage consumers to purchase the apples before they turn rotten.

As another example, if demand is high (consumers are purchasing many units of a product) and supply is low (producers are unable to produce many units of a product), the price of this product will be raised to take advantage of the demand for the product. Because consumes are already intent on purchasing this product, they may be perfectly happy to pay a premium to have it. This leads us to the purpose of this investigation: what happens when demand for a product is very high and supply is very low?

What's a Black Market?
Often times, when supply is extremely limited, individuals will hoard several units of the product in question and sell them privately, usually at prices that are several orders of magnitude higher than the initial price set by the producer. This is called a "Black Market", which is a market for goods that exists outside the typical marketplace for the same item.

One such example are bars of chocolate during the second World War in Europe. With the demand for chocolate very high and supply very low, whatever chocolate that could be had would be sold for prices much higher than during peacetime.

In the modern case of popular electronic items such as the Microsoft Xbox 360, a revolutionary video game console, initial supply of the product was very low compared the runaway demand for the same product. Lineups and riots outside video game stores caused havoc on the night of release. Many consumers, content to have received their product, went home to enjoy their purchase.

Why eBay?
Some opportunistic individuals, however, recognized that many other individuals who could not purchase a unit based on initial supply would be willing to pay a steep premium for the game system. These individuals turned to eBay, a global marketplace for products of every description. Placing the rare commodity up for auction, thousands of consumers from around the world battled for the prestige of being one of the first to own the product, often at any price. As individuals with more money than sense racked auctions up into the thousands of dollars, the world watched in stunned amusement as the ugly side of supply and demand worked its magic. With eBay as the conduit, with supply at a standstill, and with demand exceeding the wildest dreams of Microsoft, sellers began to rake in the dough, sometimes to the amount of tens of thousands of dollars, with a minimal initial investment.

The positive side of ebay
eBay was created as a useful tool where almost anyone can buy or sell practically anything. eBay has member all over the world, who buy millions of items in a way that is quick and convenient for both the buyer and seller. “eBay's mission is to provide a global trading platform where practically anyone can trade practically anything” Buyers can easily search for the items and they want and can bid only as much as they wish to pay, the sellers set a starting price according to what they want as the minimal amount for the item. In general eBay is huge online market that makes it easy to sell items worldwide for a price that satisfies both parties



Problems
While in theory eBay is a great idea, in practice there are many problems with the way it works. A big problem facing eBay users today is the unreasonable prices high demand items are being sold for. Items such the iphone or Xbox 360 were practically unattainable when they first appeared on the market. Some of the few lucky individuals who managed to get one took advantage of the shortage and put the item for sale on eBay. People who were desperate to get an Xbox or iphone or many other high demand items were willing to pay almost anything. Each bid outdid the other and the price rose quickly until the item was sold for many times its original value and the seller made a huge profit. eBay has become on of the easiest get rich quick schemes ever, and with the the creators of eBay unable to do anything to it without affecting the market it will probably keep happening.

Making a Quick Buck -- Michael


The art of trading and selling illegal or otherwise unobtainable goods has always been observed with noticeable criticism. As previously noted it is nothing new, having existed throughout the years it is merely another fine point of our marvelous free market system. However, with our recent advances in global communication, i.e. the internet, the black market has taken on a whole new form. Gone are the days of old when one had to travel to the deepest, darkest depths of the societal underworld to obtain their hearts desire. Now all that is required is a glorified calculator and a decent Internet connection. And while the internet in itself is a sufficient enough route to finding all sorts of shady dealers, it is eBay that has brought order and efficiency to this scandalous market. eBay has provided not only a means for these “shady dealers” to conduct business, but transformed it into a booming market. eBay has its fair share of profiting entrepreneurs scalping tickets and reselling their Xbox 360’s, Playstation 3’s and iPhones; as well as common contraband including the likes of AK-47’S, Cuban Cigars, Plutonium, organs and various illicit drugs; but it doesn’t stop there, some items listed on eBay go beyond rational, into the land of the truly bizarre: Newborn Children, a Nuclear cruise-missile-carrying submarine, a Human Soul and Tickets to a death-row execution (bringing scalping to an all new level) are but a few examples of what sort of things have been put up for auction. Ultimately, the underground move into the online world was an inherent one, and only time will tell what the future brings for the Black Market.

What goods can make a huge profit?
- Good in shortage - Xbox360, Wii - Unique goods - Britney Spears's chewing gum, one's soul - Mystery goods - "A ghost in the jar" - Antique goods -...

A decade-old toasted cheese sandwich said was sold for $28,000.
A woman named Dianne Duyser,from Florida, was selling a sandwich which she believed bearing an image of the Virgin Mary. As she was about to eat it in the Autumm 1994,she noticed the image that burned into her sandwich. She said she had done nothing to preserve the sandwich except keeping it in a plastic bag but " "it doesn't fall apart or crumble or anything". She also said it brought her a lot of lucks including winning $ 70,000 at a casino near her Florida home.



By the time the sandwich auction closed at the price $28,000 on Monday, the sale had received over 1.7 million hits on the auction site. An internet casino called GoldenPalace.com confirmed it had purchased the sandwich and said it would take the sandwich on world tour then selling it and dnating the money to charity.

Xbox 360 :$5000 and up -get rich in only one day


In November of 2005, as big box retailers quickly start selling out of the Xbox 360, some lucky buyers were seeing a nice turnaround on their investment. And more and more were seeing an obscenely profitable one.

Internet auctions of Microsoft's new console were already heating up, prompted undoubtedly by some retail stores telling customers they did not expect to get any more Xbox 360s in stock before January. While Microsoft (Research) was, in fact, expected to send at least one more shipment to retailers before the holiday, that was not stopping consumer panic.

Auctions on eBay for the machine were escalating fast. Early Tuesday morning, core systems were selling for as little as $650, a notable markup from their $299 retail price, but not outrageous by eBay standards. Premium systems (with a wireless controller, hard drive and cables for high definition TVs) were selling for closer to $1,000, a $600 markup from their $399 in-store price.

By mid-morning, though, one premium system sold for $3,050, with well over a dozen following suit, coming in between $3,000 and $4,000. By mid-afternoon, one buyer was so eager to own one of the new systems paid $5,100 for a hard-drive enabled machine and a copy of "Need for Speed: Most Wanted" - and the eager beaver would have to wait another two weeks before the console was shipped, according to the seller. Jus few days after, the aution even got hotter and another extreme buyer paid $10,050 for the machine. The buyer might please with what he got,but for sure the seller was the happiest one with '''an extreme profit of more than $9,000 - 2500% the real value of the Xbox 360!! '''

However,The bidding was only likely to escalate as shortages (and the inevitable media hype surrounding them) continue. The weeks leading up to Christmas could see some jaw-dropping prices.

(Work cited: "CNN.com")

A Sportcar for One dollar


On the 16th of June, 2005, a DJ named "Tim Shaw" was doing his usual 10 p.m.-to-1 a.m. shift at Birmingham-based Kerrang! 105.2 FM when he told pin-up girl "Jodie Marsh" on air that he'd be willing to leave his wife and two kids for her.

Unfortunately, his long-suffering wife was listening — and quickly put up his Lotus Esprit Turbo sports car for sale on eBay.

"I need to get rid of this car immediately — ideally in the next 2-3 hours before my cheating [jerk] husband gets home to find it gone and all his belongings in the street," Hayley Shaw wrote on the eBay description page, which as of Wednesday afternoon was still up.

"I am the registered owner and I have the log book. Please only buy if you can pick up tonight," she added.

'''The auction lasted exactly five minutes and three seconds. The car, estimated to be worth $45,000, sold for 50 pence (90 cents)''' to a eBay user ID "goddamn7" and quickly driven away before the real owner Mr.Shaw even came home. The buyer also left his positive feedback : “Thank you Hayley the car is excellent thank your hubby for me.”

According to : "AutionBytes", June 24,2005

What is eBay Doing to Stop Enormous Price Increases? -- Janaye
All in all, eBay is doing next to nothing to stop prices from increasing to extreme levels. After all, the whole point of an auction is to allow buyers to bid for a product and the buyer who values the product most will receive it. Although, eBay is charging members fees to use their services in an attempt to balance supply and demand. They do not charge a fee to join eBay, but they do charge listing and final value fees which range with the price of the good. These fees can be found on eBay's fees schedule.

Upon insertion of a listing, eBay receives a fixed price depending on the price the item is listed for, which becomes larger as the price of the item becomes larger. Listing fees range from $0.20 to $4.80. Then, when the item is sold, eBay receives a percentage of the price the item sold for. This is called a final value fee. This percentage also becomes larger as the closing value of the item becomes larger. The final value fees range from 5.25% - 10% of the closing value. Business and industrial fees differ from personal fees. For a business, listing fees are $20.00 and the final value fee is 1% of the closing value (with a maximum of $250.00). So really, because of this commission, it is in eBay's best interest to have products sell for large prices on their website.

If eBay were to place a limit, or price ceiling, on the price a product could sell for, demand would very quickly exceed supply and there would be a shortage of the product. Often, eBay has items up for auction that are one of a kind. Placing a maximum on the price of that item will result in many buyers who would be willing to pay the maximum. If this is the case, either nobody will get the item or the seller will discriminate or may even receive "under-the-table" payments from a buyer.

Patrick Ryan

 * 1) http://reviews.ebay.com/Apple-iPhone-ebay-Paypal-scam_W0QQugidZ10000000003794473?ssPageName=BUYGD:CAT:-1:SEARCH:1
 * 2) http://www.iphonematters.com/article/iphone_ebay_auction_topping_1500_175/
 * 3) http://gizmodo.com/gadgets/apple/iphone-ebay-and-craigslist-watch-its-a-buyers-market-274056.php
 * 4) http://ideas.4brad.com/iphone-ebay-frenzy
 * 5) http://reviews.ebay.ca/iPhone-pre-sale-auctions-are-banned_W0QQugidZ10000000003812862
 * 6) http://joeceo.blogspot.com/2006/02/how-to-make-killing-with-ps3-ebay.html
 * 7) http://arstechnica.com/news.ars/post/20061015-7988.html
 * 8) http://www.ecommercetimes.com/rsstory/48120.html
 * 9) http://gizmodo.com/gadgets/home-entertainment/ps3-goes-for-9000-on-ebay-215536.php
 * 10) http://www.comnetslash.com/2007/10/05/the-8400-xbox-360-package/

Olga Trailina

 * 1. http://findarticles.com/p/articles/mi_m0HWW/is_46_3/ai_77033852
 * 2.http://music.guardian.co.uk/news/story/0,,2186298,00.html#article_continue
 * 3.http://cgi.ebay.com/4-HANNAH-MONTANA-MILEY-CYRUS-FLOOR-TICKETS-CLEVELAND-OH_W0QQitemZ150170999438QQihZ005QQcategoryZ16122QQcmdZViewItem
 * 4.http://www.theregister.co.uk/2005/07/05/ebay_bpi/
 * 5.http://gizmodo.com/gadgets/home-entertainment/ps3-blackmarket-ebay-bubble-shows-prices-up-to-99999999-215714.php
 * 6.http://www.iphoneworld.ca/news/2007/03/20/iphone-scammers-hit-ebay/
 * 7.http://www.theregister.co.uk/2007/03/21/ebay_fraud_anatomy/
 * 8.http://reviews.ebay.com/GUITAR-HERO-3-PRE-SALE-SCAM_W0QQugidZ10000000004066626?ssPageName=BUYGD:CAT:-1:LISTINGS:4
 * 9.http://money.cnn.com/2005/11/22/technology/personaltech/xbox_ebay/index.htm
 * 10.http://www.news.com/8301-10784_3-9718909-7.html

Janaye Henderson

 * 1) http://www.richerthanyourdad.com/why-ebay-is-the-new-blackgray-market/
 * 2) http://www.unclegamer.com/editorials/discuss/ebay_the_black_market_for_next_generation_consoles/
 * 3) http://www.iphoneworld.ca/news/2007/03/20/iphone-scammers-hit-ebay/
 * 4) http://gizmodo.com/gadgets/home-entertainment/ps3-goes-for-9000-on-ebay-215536.php
 * 5) http://findarticles.com/p/articles/mi_m0HWW/is_46_3/ai_77033852
 * 6) http://www.pcworld.com/article/id,135884-pg,1/article.html
 * 7) http://www.theregister.co.uk/2005/07/05/ebay_bpi/
 * 8) http://www.dcemu.co.uk/vbulletin/showthread.php?t=43027
 * 9) http://www.theregister.co.uk/2005/01/31/ebay_securicor_tickets/
 * 10) http://pages.ebay.com/help/policies/user-agreement.html?_trksid=m40

Tran Diep

 * 1.http://dvdreviews.suite101.com/blog.cfm/black_market_online_shopping
 * 2.http://www.nytimes.com/2005/06/21/technology/21data.html?partner=rssnyt&emc=rss&pagewanted=all
 * 3.http://findarticles.com/p/articles/mi_m0HWW/is_46_3/ai_77033852
 * 4.http://www.theregister.co.uk/2005/01/31/ebay_securicor_tickets/
 * 5.http://www.gopesa.org/
 * 6.http://www.ebayproblem.com/
 * 7.http://www.foxnews.com/story/0,2933,160390,00.html
 * 8.http://www.smallbusinesscomputing.com/emarketing/article.php/3079321
 * 9.http://pages.ebay.com/securitycenter/avoiding_fraud.html
 * 10.http://pages.ebay.ca/help/confidence/questions/avoid-fraud.html
 * 11.http://money.cnn.com/2005/11/22/technology/personaltech/xbox_ebay/index.htm

Michael Gilday-Palin

 * 1.http://findarticles.com/p/articles/mi_m0HWW/is_46_3/ai_77033852
 * 2.http://www.theregister.co.uk/2005/01/31/ebay_securicor_tickets/
 * 3.http://gizmodo.com/gadgets/home-entertainment/ps3-blackmarket-ebay-bubble-shows-prices-up-to-99999999-215714.php
 * 4.http://www.saraeast.com/2007/10/05/the-largest-black-market-in-the-world/
 * 5.http://www.theregister.co.uk/2007/08/06/malware_marketplace/
 * 6.http://pacer.utm.edu/2711.htm
 * 7.http://www.wired.com/gadgets/miscellaneous/news/2007/11/iphone_china
 * 8.http://www.unclegamer.com/editorials/discuss/ebay_the_black_market_for_next_generation_consoles/
 * 9.http://www.taipanfinancialnews.com/fng/archive/fng20071029.html
 * 10.http://www.wired.com/gaming/virtualworlds/news/2006/05/70909
 * 11.http://en.wikipedia.org/wiki/Black_market