A dynamic model of auctions with buy-it-now: theory and evidence
AbstractIn the ascending-price auctions with Yahoo!-type buy-it-now (BIN), we characterize and derive the closed-form solution for the optimal bidding strategy of the bidder and the optimal BIN price of the seller when they are both risk-averse. The seller is shown to be strictly better o with the BIN option, while the bidders are better o only when their valuation is greater than a threshold value. The theory also implies that the expected transaction price is higher in an auction with an optimal BIN price than one without a BIN. This prediction is conrmed by our data collected from Taiwan's Yahoo! auctions of Nikon digital cameras.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 38371.
Date of creation: 03 Apr 2006
Date of revision: 24 Nov 2011
online auction; but-it-now; risk-aversion;
Other versions of this item:
- Jong-Rong Chen & Kong-Pin Chen & Chien-Fu Chou & Ching-I Huang, 2013. "A Dynamic Model of Auctions with Buy-It-Now: Theory and Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 61(2), pages 393-429, 06.
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
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