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Auctions with a Buy Price

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Author Info
John Wooders
Stanley S. Reynolds

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Abstract

Internet auctions on eBay and Yahoo allow sellers to list their auctions with a Buy-Now option. In such auctions the seller sets a buy price at which a bidder may purchase the item immediately and end the auction. In the eBay version of a buy-now auction, the buy-now option disappears as soon as a bid is placed, while in the Yahoo version the buy-now option remains in effect throughout the auction. When bidders are risk neutral there is no advantage to introducing a buy price in either an eBay or Yahoo auction. When bidders are risk averse, introducing a buy price raises seller revenue in both the eBay and the Yahoo auction for a wide range of buy prices. We show that while the Yahoo format raises more revenue than the eBay format (when the reserve and the buy prices are the same in both auctions), the auctions are utility equivalent from the bidders' perspective

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Publisher Info
Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 130.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:130

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Related research
Keywords: Online Auctions; Electronic Commerce;

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Dan Ariely & Axel Ockenfels & Alvin E. Roth, 2005. "An Experimental Analysis of Ending Rules in Internet Auctions," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 890-907, Winter.
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  2. Timothy Mathews & Brett Katzman, 2006. "The role of varying risk attitudes in an auction with a buyout option," Economic Theory, Springer, vol. 27(3), pages 597-613, 04. [Downloadable!] (restricted)
  3. Kirkegaard, René & Overgaard, Per Baltzer, . "Buy-Out Prices in Online Auctions: Multi-Unit Demand," Economics Working Papers 2003-4, School of Economics and Management, University of Aarhus. [Downloadable!]
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  4. Matthews, Steven, 1987. "Comparing Auctions for Risk Averse Buyers: A Buyer's Point of View," Econometrica, Econometric Society, vol. 55(3), pages 633-46, May. [Downloadable!] (restricted)
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  5. Budish, Eric B. & Takeyama, Lisa N., 2001. "Buy prices in online auctions: irrationality on the internet?," Economics Letters, Elsevier, vol. 72(3), pages 325-333, September. [Downloadable!] (restricted)
  6. Peters, Michael & Severinov, Sergei, 2005. "Internet Auctions with Many Traders," Micro Theory Working Papers peters-05-03-30-03-06-03, Microeconomics.ca Website, revised 23 Jan 2006. [Downloadable!]
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  7. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September. [Downloadable!]
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  8. Roberto Burguet, 2000. "Auction theory: a guided tour," Investigaciones Economicas, Fundación SEPI, vol. 24(1), pages 3-50, January. [Downloadable!]
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  9. Steven Anderson & Daniel Friedman & Garrett Milam & Nirvikar Singh, 2004. "Buy it Now: A Hybrid Internet Market Institution," Industrial Organization 0412003, EconWPA. [Downloadable!]
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  10. Burguet, Roberto, 2007. "Right to choose in oral auctions," Economics Letters, Elsevier, vol. 95(2), pages 167-173, May. [Downloadable!] (restricted)
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  11. Lopomo, Giuseppe, 1998. "The English Auction Is Optimal Among Simple Sequential Auctions," Journal of Economic Theory, Elsevier, vol. 82(1), pages 144-166, September. [Downloadable!] (restricted)
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  12. Timothy Mathews, 2003. "A Risk Averse Seller in a Continuous Time Auction with a Buyout Option," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 5(2), January. [Downloadable!]
  13. Holt, Charles A, Jr, 1980. "Competitive Bidding for Contracts under Alternative Auction Procedures," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 433-45, June. [Downloadable!] (restricted)
  14. John Wooders & Stanley S. Reynolds, 2004. "Auctions with a Buy Price," Econometric Society 2004 North American Summer Meetings 130, Econometric Society.
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  15. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. René Kirkegaard & Per Baltzer Overgaard, 2002. "Buy-Out Prices in Online Auctions: Multi-Unit Demand," CIE Discussion Papers 2003-01, University of Copenhagen. Department of Economics. Centre for Industrial Economics, revised Feb 2003. [Downloadable!]
    Other versions:
  2. Nicholas Shunda, 2007. "Auctions with a Buy Price: The Case of Reference-Dependent Preferences," Working papers 2007-42, University of Connecticut, Department of Economics. [Downloadable!]
  3. Leonardo Rezende, 2008. "Econometrics of auctions by least squares," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(7), pages 925-948. [Downloadable!]
  4. Subir Bose & Arup Daripa, 2009. "Optimal sale across venues and auctions with a buy-now option," Economic Theory, Springer, vol. 38(1), pages 137-168, January. [Downloadable!] (restricted)
  5. Gary E. Bolton & Axel Ockenfels, 2008. "Does Laboratory Trading Mirror Behavior in Real World Markets? Fair Bargaining and Competitive Bidding on EBay," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  6. Stanley Reynolds & John Wooders, 2009. "Auctions with a buy price," Economic Theory, Springer, vol. 38(1), pages 9-39, January. [Downloadable!] (restricted)
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  7. Sun, Chia-Hung & Hsu, Ming-Fei, 2007. "The Determinants of Price in Online Auctions: More Evidence from Quantile Regression," Economics Working Papers wp07-18, School of Economics, University of Wollongong, NSW, Australia. [Downloadable!]
  8. Philipp Maier, 2005. "A `Global Village' without borders? International price differentials at eBay," DNB Working Papers 044, Netherlands Central Bank, Research Department. [Downloadable!]
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  9. Quazi Shahriar, 2008. "Common Value Auctions with Buy Prices," Working Papers 0031, San Diego State University, Department of Economics. [Downloadable!]
  10. Radosveta Ivanova-Stenzel & Sabine Kröger, 2005. "Price formation in a sequential selling mechanism," Discussion Papers 92, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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  11. Elena Katok & Anthony Kwasnica, 2008. "Time is money: The effect of clock speed on seller’s revenue in Dutch auctions," Experimental Economics, Springer, vol. 11(4), pages 344-357, December. [Downloadable!] (restricted)
  12. Shunda, Nicholas, 2009. "Auctioning with Aspirations: Keep Them Low (Enough)," MPRA Paper 16242, University Library of Munich, Germany. [Downloadable!]
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  13. George Deltas, 2009. "Introduction to the Symposium," Economic Theory, Springer, vol. 38(1), pages 1-7, January. [Downloadable!] (restricted)
  14. Ernan Haruvy & Peter Popkowski Leszczyc & Octavian Carare & James Cox & Eric Greenleaf & Wolfgang Jank & Sandy Jap & Young-Hoon Park & Michael Rothkopf, 2008. "Competition between auctions," Marketing Letters, Springer, vol. 19(3), pages 431-448, December. [Downloadable!] (restricted)
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