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Buyer preferences for auction pricing rules in online outsourcing markets: fixed price vs. open price

Author

Listed:
  • Zhijuan Hong

    (Shandong University of Finance and Economics)

  • Ruhai Wu

    (McMaster University)

  • Yan Sun

    (Shandong University of Finance and Economics)

  • Kunxiang Dong

    (Shandong University of Finance and Economics)

Abstract

Fixed-price and open-price are two mechanisms with different auction pricing rules that are popularly used in online outsourcing markets. This research empirically examines the determinants of buyers’ choices between the two mechanisms with secondary data from an online outsourcing market. We found that buyers tend to use open-price auctions with large size projects, while their propensity to use fixed-price auctions increases when they are more familiar with the project, have more trading experience in the market, or less trust in the service providers. Moreover, buyer experience has significant moderating effects on the impact of project size and buyer distrust. Our empirical results reveal a unique insight that incomplete information and information asymmetry, rather than the expected buyer surplus, are critical factors to buyers’ preferences on bid dimensionality.

Suggested Citation

  • Zhijuan Hong & Ruhai Wu & Yan Sun & Kunxiang Dong, 2020. "Buyer preferences for auction pricing rules in online outsourcing markets: fixed price vs. open price," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(1), pages 163-179, March.
    • Handle: RePEc:spr:elmark:v:30:y:2020:i:1:d:10.1007_s12525-019-00378-3
    DOI: 10.1007/s12525-019-00378-3
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    More about this item

    Keywords

    Pricing rule; Auction mechanism; Bid dimensionality; Online outsourcing markets; Online outsourcing; Buyer-determined auctions;
    All these keywords.

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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