The platform design, the process that helps potential buyers on the internet navigate toward products they may purchase, plays a critical role in reducing search frictions and determining market outcomes. We study a key trade-off associated with two important roles of efficient platform design: guiding consumers to their most desired product while also strengthening seller incentives to lower prices. We use simple theory to illustrate this, and then combine detailed browsing data from eBay and an equilibrium model of consumer search and price competition to quantitatively assess this trade-off in the particular context of a change in eBay's marketplace design.

We document some early effects of how mobile devices might change Internet and retail commerce. We present three main findings based on an analysis of eBay's mobile shopping application and core Internet platform. First, early adopters of mobile e-commerce applications appear to be people who already were relatively heavy Internet commerce users. Second, adoption of the mobile shopping application is associated with both an immediate and sustained increase in total platform purchasing, with little evidence of substitution from the core platform. Third, differences in user behavior across the mobile applications and the regular Internet site are not yet so dramatic.

We estimate the sensitivity of Internet retail purchasing to sales taxes using eBay data. Our first approach exploits the fact that a seller's location—and therefore the applicable tax rate—is revealed only after a buyer has expressed interest in an item. We document how adverse tax “surprises” reduce the likelihood of purchase and shift subsequent purchases toward out-of-state sellers. We then use more aggregated data to estimate that every one percentage point increase in a state's sales tax increases online purchases by state residents by almost 2 percent, while decreasing their online purchases from state retailers by 3–4 percent.

Auctions were very popular in the early days of internet commerce, but today online sellers mostly use posted prices. We model the choice between auctions and posted prices as a trade-off between competitive price discovery and convenience. Evidence from eBay fits the theory. We then show that the decline in auctions was not driven by compositional shifts in seller experience or items sold, but by changing seller incentives. We estimate the demand facing sellers and document falling sale probabilities and falling relative demand for auctions. Both favor posted prices; our estimates suggest the latter is more important for the auction decline. Survey evidence provides further support.