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The optimal format to sell a product through the internet: Posted price, auction, and buy-price auction

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  • Sun, Daewon
  • Li, Erick
  • Hayya, Jack C.

Abstract

Motivated by the proliferation of online selling, we study a seller's decision problem: The seller has one unit of product and needs to choose a selling format among three different ones (posted price, auction, and buy-price auction), as well as to decide upon the corresponding decision variables. By incorporating the auction participation cost of the bidders and the operational cost of the seller, we demonstrate that these two costs play an important role in the choice of a selling format. We first characterize and identify the customers' decision rule for buy-price auction and then present the seller's optimal choices by comparing the performance of the three formats. Through a comprehensive numerical study, we investigate the performance of the three selling formats by changing the experimental factors.

Suggested Citation

  • Sun, Daewon & Li, Erick & Hayya, Jack C., 2010. "The optimal format to sell a product through the internet: Posted price, auction, and buy-price auction," International Journal of Production Economics, Elsevier, vol. 127(1), pages 147-157, September.
  • Handle: RePEc:eee:proeco:v:127:y:2010:i:1:p:147-157
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    References listed on IDEAS

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    Cited by:

    1. Chen, Kong-Pin & Lai, Hung-pin & Yu, Ya-Ting, 2018. "The seller's listing strategy in online auctions: Evidence from eBay," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 107-144.
    2. Chen, Kebing, 2012. "Procurement strategies and coordination mechanism of the supply chain with one manufacturer and multiple suppliers," International Journal of Production Economics, Elsevier, vol. 138(1), pages 125-135.
    3. Matzke, Andreas & Volling, Thomas & Spengler, Thomas S., 2016. "Upgrade auctions in build-to-order manufacturing with loss-averse customers," European Journal of Operational Research, Elsevier, vol. 250(2), pages 470-479.
    4. J.M.J. Delnoij & K.J.M. De Jaegher & S. Rosenkranz, 2014. "Understanding preferences for ascending auctions, Buy-It-Now auctions and fixed prices," Working Papers 14-02, Utrecht School of Economics.
    5. Jiang, Zhong-Zhong & Fang, Shu-Cherng & Fan, Zhi-Ping & Wang, Dingwei, 2013. "Selecting optimal selling format of a product in B2C online auctions with boundedly rational customers," European Journal of Operational Research, Elsevier, vol. 226(1), pages 139-153.

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