eBay as Futures Market
I was thinking the other day for no particular reason about the expected price of the inevitable “Extended Edition” Lord of the Rings Mega-Set that New Line is sure to put out at the end of the whole trilogy being out on DVD, and thought a bit about using eBay as a futures market.
The idea is simple enough and here is how it would be executed:
- Andy is willing to bet that the price of some tangible item to be sold in the future will cost X or lower.
- Andy starts an auction on eBay with a starting price (or reserve price) of X.
- Bob thinks that the price of said tangible item will be higher than X, so he places a bid on the auction.
- Repeat Step 3 with other bidders who believe the price will be even higher.
- Once the auction ends, Andy has a contract with the highest bidder to buy said tangible item when it is placed on the market and send it.
It’s fairly simple, but it could easily be pulled off. The question is whether anyone would go for this plan, if it’s possible to have a futures market on items which don’t exist yet, and if it’s within the bounds of eBay rules.
This scheme couled easily be repeated with more classic futures markets on eBay, for example people betting on the price of a bushel of corn in July or something.