Ebay Case Study Skill Building One
Joyce W. Stevens
Oklahoma Wesleyan University
Ebay Case Study Skill Building One 1. How does eBay create value? eBay creates value by bringing together buyers and sellers. Although, eBay has created a virtual or online market place in an organized and safe way where people can buy and sell wide variety of goods. Thus, eBay has provided a kind of platform for all those people who hate to go out in the physical marketplace and love to shop in the convenience of their living rooms. eBay ensures that all transactions are carried out in a fair way and offers reasonable safety for both, the buyer as well as the seller. 2. What potential contracting problems exist on eBay?
Potential contracting problems which exists on eBay are misuse of online marketplace in the form of trading on banned items, selling of damaged products, frauds in the form of non payment of goods after buying or non delivery of goods after selling etc. Also, since it is an online marketplace, it is difficult to judge the authenticity of buyers and sellers in advance. Another potential contracting problem is transport of goods from one place to another. eBay does not have in house transportation system and has to rely on the services which the sellers chose to deliver. 3. How does eBay address these problems? eBay addresses these problems by insuring the buyers for non delivery/ damaged delivery of products, establishment of in house fraud prevention and escrow services to prevent fraudulent transactions. Also, payment mechanisms on the websites are one of the best in the industry.

4. What are the contracting costs at eBay?
The major contracting costs for eBay are the human resources costs in the form of technical staff, finance and accounting staff, safety and insurance staff, marketing staff etc. Other costs are costs related to the maintenance of websites, costs related to sending and receiving payments over the web, marketing and advertising costs, insurance costs, verification costs etc. 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? Under investing? Explain.
The low ratio of fraudulent transactions on EBay is the result of strict vigilance and excellent investment on infrastructure for fraud protection. EBay has done everything to ensure that consumers using eBay feel safe and secure. If eBay will not invest in such facilities, it will lose the trust of consumers and will not be able to sustain itself. Therefore, it is not true that EBay is overinvesting in addressing contracting problems

References
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