Explaining and Applying Partial Competitive Equilibrium Analysis

Overview:Allowing firms and consumers to interact in markets can facilitate an equilibrium price that balances the willingness to sell by firms with the willingness to purchase by consumers.eBay is an example of an online platform that brings consumers (i.e. buyers) and producers (i.e sellers) together to exchange goods.A common method of exchange is for a producer to sell an item using a classic English auction, where the highest bid by a buyer at the expiration of the auction wins.This winning buyer pays the winning bid amount in exchange for the item, which upon receipt of payment the seller ships.Some features of the platform exist in an attempt to better facilitate the basic functioning of the EBay platform.This includes a user ranking system, where feedback can be provided and buyers and sellers are ranked and a system of buyer protections in an effort to ensure authentic items are sold.The seller can set the initial bid price to an auction or consider more complicated formats, such as setting the initial bid price but also setting a reserve price, which initially is only known to the seller and the item will only be sold if the winning bid exceeds the reserve price. Additionally, the seller sets the shipping cost amount and pays a percentage of the winning bid to EBay. The potential buyers can bid periodically throughout the auction up to just before the end of the auction or can submit a maximum bid amount, which can be updated throughout the auction up to just before the expiration of allotted time. Finally, Hasker et al. (2010) offers a detailed review of EBay with a summary on recent research.Reference:Hasker, K. and R. Sickles. (2010). eBay in the Economic Literature: Analysis of an Auction Marketplace. Review of Industrial Organization, 37(1):3-42.Task 1:As your initial post, address the following questions:Describe how EBay is a marketplace guided by price.How does it coordinate economic behavior between buyers and sellers?Examining an EBay auction, describe how the winning bid of a successful auction establishes an equilibrium price. How was utility-maximizing behavior relevant to the winning consumer? How was profit-maximizing behavior relevant to the seller?If an internet sales tax had to be paid, how would this alter the equilibrium in given EBay auction?Review Hasker et al. (2010) analysis of E-Bay and review of research on EBay.What behaviors or events could cause E-Bay auctions to fail?In your opinion, are user feedback listings and rankings sufficient to overcome this possibility?Discuss at least one finding that you found interesting from Hasker et al. (2010) analysis of E-Bay auctions. ( on the attachment)