A heterogeneous, thin market – No two names are the same and there is a small number of buyers and sellers.
Most markets contain similar products. New, mass-produced products are for all practical purposes identical. For example, a new Honda Civic is similar to other new Honda Civics. Even buying a used car is a matter of determining the true condition of the car, looking up the price of similar cars, and negotiating within a set price range. But buying a used car is much easier than buying a domain name.
No two domain names are identical. Mom.com is not Tom.com or Rom.com. One business selling gifts may prefer Mom.com. Another business selling to young men may want Tom.com, but definitely not Mom.com, which would give it the image of mamma’s boys. Another computer business may want Rom.com, but not Mom.com or Tom.com.
In economics terminology, this is known as a heterogeneous market and the problem of matching buyers and sellers is called a matching problem.
Thin Market
In economics, a common assumption for most markets is that a large number of buyers and sellers drive the price to equilibrium. This is shown by supply and demand curves intersecting at an equilibrium price.
But since each domain name is different, there is not a large number of sellers. Since there is only one owner of a domain name, there is only one seller.
There is also usually only one interested potential buyer at a time. There is usually only one computer firm interested in the name ROM.com during one month and probably the only serious interest in a year. This leads to one-to-one bargaining positions, with brinkmanship.
But one exception is the wholesale market, where numerous speculators are bidding on one domain name.
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