Do the heads of eBay and Amazon know about the Chinese shopping site Taobao (like eBay without auctions)? If so, why don’t they imitate it? Maybe they can’t match its bigger selection (e.g., food, detergent) and better prices, but they could imitate the better seller feedback and instant communication (chat boxes) with sellers.
In my theory of human evolution I propose that we have ceremonies, rituals, and festivals (and associated holidays) because they caused trading that would otherwise not have taken place. Ceremonies and so forth increased the demand for certain goods — gifts and high-end clothes, for example. These goods are important economically far out of proportion to their volume or monetary value or daily use because they increase innovation. They help the most skilled artisans– the ones most likely to innovate — make a living.
The leaders of Taobao understand this function of festivals/holiday and have put it to use: They have created new festivals/holidays. The biggest is Double Eleven (November 11), which started five years ago. On Double Eleven, a large fraction of taobao merchants have discounts, big (50%) and small (5%). Sales have grown each year and this year reached about $3 billion, according to one site. According to a Chinese friend, the sales were about $10 billion. CyberMonday (about $1 billion in 2011) is far behind
I have never read about this function of ceremonies, festivals, etc., in any economics book or paper. Double Eleven shows their economic force. This neglect is an example of what I consider the biggest problem with modern economics: lack of attention to and lack of understanding of innovation.