From one of my favorite economic blogs, Marginal Revolution

Morgan and co-author Tanjim Hossain, an assistant professor at Hong Kong University of Science and Technology, held 80 auctions of new music CDs and Xbox video games to test how consumers respond to different price schemes. In the eBay study, they varied the opening bid price and shipping charges on identical CDs, ranging from Britney Spears to Nirvana, and video games, including Halo and NBA 2K2.

…A perfectly informed and fully rational consumer will merely add together the two parts of a price to obtain the total out-of-pocket price for an item and then decide whether to buy and how much to bid based on this total price.

But that’s not what happened in their eBay auctions. Instead, they found that lowering the opening bid price while raising shipping charges attracts earlier and more bidders and ultimately leads to higher revenues compared with doing the reverse. Those findings suggest consumers pay less attention or even completely overlook shipping costs when making bids…

Full paper here. But more snippets here.

While the finding is interesting. . . I think there is couple of flaw. . .

1) sample size is too small, a quick price check for completed listings on ebay will show pretty decent variations for prices of the same item

2) I bet the results wont hold for fixed price listings

3) price variations are probably driven more by (ie correlated with) opening bid price than with shipping. . .

anyways. . . who am I to question someone with a PHD?