How eBay Create Value

EBay builds value by putting customers and sellers together in an online marketplace where users can buy and sell a wide range of products and services. It offers a mechanism for people who want to do their shopping from the comfort of their own homes. It also allows buyers and sellers to complete purchases in a convenient and secure manner. Furthermore, eBay adds value by allowing individuals to promote their goods, thus establishing a niche in the internet industry for direct sellers. eBay, on the other hand, assists consumers in obtaining various items of their choosing by examining their contents and features online. As such, buyers are in positions to see photos or videos, and then they order and pay money though unable to know these products’ quality or reliability (Iansiti & Levien, 2004). Nevertheless, by creating safe and reliable online auction shop, many sellers and buyers get access to eBay hence the creation of value through the availability of many types of products and create value (Hasker & Sickles, 2010).
Question 2: Potential Contracting Problems That Exist On eBay
One of the contracting problems on eBay may be the possibility of selling damaged or inferior products by fraudulent sellers. Other problems may include the misuse of eBay by trading banned items, sellers delivering products that do not meet the expectations of the buyer based on the item description or there could be non-payment of goods by the buyer or non-delivery of the goods by the seller. It is also difficult to judge the authenticity of buyers and sellers in advance, which creates a problem for eBay by having to verify the people involved in the transaction. Besides, another problem would be the issue of transportation of goods from one place to another since eBay has no control on the delivery schedule of products as they have to rely on other transportation system the seller chooses.
Question 3: How eBay addresses the Problems
EBay addresses these problems by insuring the buyers for non-delivery/damaged delivery of products. It also establishes in-house fraud prevention and escrow services to prevent fraudulent transactions. Besides, eBay has one of the best payment mechanisms in the industry hence blocks people for future transactions who have committed frauds on the website.
Question 4: The Contracting Costs at eBay
The contracting costs relate to website maintenance, costs in the form of technical staff, finance and accounting staff, safety, insurance and marketing staffs, and costs related to sending and receiving payments over the web, marketing and advertising costs, insurance costs, and verification costs (Hasker & Sickles, 2010).
Question 5: My Response to Ebay’s Claims about Having Only a Small Problem with Fraud and Misuse of the System
I think they are investing just right. The low ratio of fraudulent transactions that they boast could only be the result of strict vigilance and excellent investment on infrastructure for fraud protection. If eBay did not provide this sort of confidence to its buyers and sellers, it would lose the trust of consumers and become unsustainable (Brickley, Smith & Zimmerman, 2015).
Chapter 11
Part A
The practice of tipping has emerged as a major method of compensating the waiting staff for two primary reasons. The first is that the method minimizes the fixed cost of staffing. For example, rather than paying waiters and waitresses minimum wage, a restaurant may pay them 50-60% of that knowing they are likely to make more than the minimum with tips (provided the nature of their work deserve the tips). As such, companies can legally engage in such payment arrangements. Besides, the method incentivizes waiters and waitresses to provide the best customer service possible. Because they will want to earn the highest amount possible in tips, they will work diligently to earn such. Consequently, if their attention to customer serviced declines, they will not receive as many payments.
Most if not all wait staff makes below the minimum wage and depend highly on the Tips that come from patrons dinning. The friendlier the staff, the quicker the food is serviced and if the food and drinks are up to the standard of the patrons determines the amount of the Tip. Having Tips in place reduces the amount of cost for staffing. Restaurants pay below minimum wage to wait staff having them to depend on Tips to compensate them for the Time and energy. Not to mention the idea of a Tip when it is an individual’s predominant source of compensation, is becoming an incentive to work hard and please the patrons.
Part B
The customer decides the amount of the tip because they will be most likely to tip based on the service that they received. If they received greater service, they would tip a larger amount and vice versa.
Part C
Restaurants require a tip for large parties to ensure that their staff is sufficiently paid and as well ensure that their staff continues to provide great service on their behalf. For instance, in larger groups, the total bill is often much smaller and the party may tip according to the bill. Making a specific requirement for tips for larger parties allows workers to continue to be incentivized to provide great customer service.

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Reference
Brickley, J., Smith, C., & Zimmerman, J. (2015). Managerial economics and organizational architecture (6th ed.). New York: McGraw Hill/Irwin.
Hasker, K., & Sickles, R. (2010). eBay in the economic literature: Analysis of an auction marketplace. Review of Industrial Organization, 37(1), 3-42.
Iansiti, M., & Levien, R. (2004). Strategy as ecology. Harvard business review, 82(3), 68-81.