When auction meets fixed price: a theoretical and empirical examination of buy-it-now auctions |
| |
Authors: | Xin Wang Alan Montgomery Kannan Srinivasan |
| |
Institution: | (1) International Business School, Brandeis University, 415 South Street, MS 032, Waltham, MA 02454, USA;(2) Tepper School of Business, Carnegie Mellon University, 5000 Forbes Ave., Pittsburgh, PA 15213, USA |
| |
Abstract: | Recently fixed pricing and auctions have been brought together in a new pricing format that offers bidders the option of prematurely
ending an auction at a fixed price. The growing popularity of auctions presents an interesting pricing decision for managers:
whether to sell at a fixed price, in a regular auction, or through a buy-it-now auction. This paper studies eBay’s buy-it-now
auction and answers the following research questions: why is fixed price used at traditional auctions, will buy-it-now increase
the seller’s profit, how is an optimal price determined, and how is the buy-it-now decision influenced by key factors such
as the customer’s cost of participating in the auction, the seller’s reserve price, and the number of potential customers.
Our results show that when customers make endogenous participation decisions according to their participation costs, buy-it-now
auctions can increase both customers’ utility and sellers’ profit. Endogenous participation has important implications for
seller’s pricing decisions such as price formats and levels. Depending on the level of the posted price, the resulting price
format could be either fixed price, buy-it-now auction or pure auction. Therefore, the seller needs to be careful and take
into account market conditions when posting a price at auctions. We empirically test the model assumptions and predictions
using data collected from eBay.
Electronic supplementary material The online version of this article (doi:) contains supplementary material, which is available to authorized users.
|
| |
Keywords: | Auctions Pricing research Game theory |
本文献已被 SpringerLink 等数据库收录! |
|