DomainMart Finds Price Inefficiencies in Domain Name Markets

The study outlines a statistical test for the existence of price differences for comparable domain names among the marketplaces. The test results suggest the existence of price inefficiencies across exchanges.

Berkeley, CA (PRWEB) January 11, 2006 –- DomainMart, a leading provider of quantitative and analytical domain-name services, outlined today the first domain name study on sale price differences between marketplaces.

The study first outlines a statistical test for the existence of price differences for comparable domain names among the marketplaces. The test results suggest the existence of price inefficiencies across exchanges. In conclusion, the study outlines some efficiency remedies for domain name markets.

“The existence of price inefficiency suggests that, on average, one side of a transaction is at a disadvantage. Moreover, price inefficiency significantly dampens a market’s transaction volume and liquidity,” says Alex Tajirian, DomainMart CEO.

To test for the existence of price differences across domain name marketplaces, a tree-regression model is used. The estimated tree resulted in 8 clusters of comparable domain names. The exchange factor was significant only in four of the clusters. The test was unable to find significant price differences across the exchanges in the low-price cluster (with an average market price of $4,941) or with the highest cluster (with an average price of $693,800). For the middle price range, the estimated tree divided the exchange factor into two groups: (1) with an average group price of $26,560 and (2) with an average price of $70,040, i.e., an average premium of 264 percent.

The magnitude of the difference between the two exchange clusters suggests that transaction costs alone cannot explain the difference.

The results, however, do not indicate whether any of these markets is under- or over-pricing the domain names. Nevertheless, there is evidence that some domain names were recently sold at a discount.

“Increasing market efficiency would expand transaction volume and liquidity of the secondary market exponentially,” add Tajirian.

Tajirian estimates the value of the limited publicly available transactions in the secondary market in 2004 for gTLDs was in excess of $35 million.

About DomainMart
DomainMart is an industry leader in providing domain-name secondary-market products and consulting services, including appraisal, escrow, private investment management accounts, protection, valuation, and parking traffic monetization management since 1996.

For more information, please visit http://www.domainmart.com/news/Price_Inefficiencies_in_Domain_Name_Markets-Empirical_Investigation.pdf or contact:

Tom Saitori, Marketing Specialist
DomainMart
e-mail: TomSaitori @ domainmart.com
Tel: +1 (415) 905-4234

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