Buy-Out Prices in Online Auctions: Multi-Unit Demand
AbstractOn many online auction sites it is now possible for a seller to augment his auction with a maximum or buy-out price. The use of this instrument has been justified in 'one-shot' auctions by appeal to impatience or risk aversion. Here we o.er additional justification by observing that trading on internet auctions is not of a 'one-shot' nature, but that market participants expect more transactions in the future. This has important implications when bidders desire multiple objects. Specifically, it is shown that an early seller has an incentive to introduce a buy-out price, if similar products are o.ered later on by other sellers. The buy-out price will increase revenue in the current auction, but revenue in future auctions will decrease, as will the sum of revenues. In contrast, if a single seller owns multiple units, overall revenue will increase, if buyers anticipate the use of buy-out prices in the future by this seller. In both cases, an optimally chosen buy-outprice introduces potential inefficiencies in the allocation.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2003-01.
Length: 48 pages
Date of creation: Oct 2002
Date of revision: Feb 2003
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sequential auctions; multi-unit demands; buy-out prices;
Other versions of this item:
- 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.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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