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Optimal fees in internet auctions

Author

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  • Alexander Matros

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  • Andriy Zapechelnyuk

Abstract

An auction house runs a second-price auction with a possibility of resale through re-auctions. It collects listing and closing fees from the seller. We find the fees which maximize the revenue of the auction house. In particular, we show that the optimal listing fee is zero. Our findings are consistent with the policies of eBay, Amazon, Yahoo, and other Internet auctions.
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Suggested Citation

  • Alexander Matros & Andriy Zapechelnyuk, 2008. "Optimal fees in internet auctions," Review of Economic Design, Springer;Society for Economic Design, vol. 12(3), pages 155-163, September.
  • Handle: RePEc:spr:reecde:v:12:y:2008:i:3:p:155-163 DOI: 10.1007/s10058-008-0044-9
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    References listed on IDEAS

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    1. Rod Garratt & Thomas Tröger, 2006. "Speculation in Standard Auctions with Resale," Econometrica, Econometric Society, vol. 74(3), pages 753-769, May.
    2. Charles Zhoucheng Zheng, 2002. "Optimal Auction with Resale," Econometrica, Econometric Society, vol. 70(6), pages 2197-2224, November.
    3. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
    4. Haile, Philip A., 2000. "Partial Pooling at the Reserve Price in Auctions with Resale Opportunities," Games and Economic Behavior, Elsevier, vol. 33(2), pages 231-248, November.
    5. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International.
    6. Reisinger, Markus, 2004. "Two-Sided Markets with Negative Externalities," Discussion Papers in Economics 478, University of Munich, Department of Economics.
    7. Haile,P.A., 1999. "Auctions with resale," Working papers 33, Wisconsin Madison - Social Systems.
    8. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International.
    9. Horstmann, Ignatius J & LaCasse, Chantale, 1997. "Secret Reserve Prices in a Bidding Model with a Resale Option," American Economic Review, American Economic Association, pages 663-684.
    10. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
    11. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April.
    12. Giacomo Calzolari & Alessandro Pavan, 2006. "Monopoly with resale," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 362-375, June.
    13. Wilson, Robert B, 1985. "Incentive Efficiency of Double Auctions," Econometrica, Econometric Society, vol. 53(5), pages 1101-1115, September.
    14. McAfee, R. Preston & Vincent, Daniel, 1997. "Sequentially Optimal Auctions," Games and Economic Behavior, Elsevier, vol. 18(2), pages 246-276, February.
    15. Rod Garratt & Thomas Tröger, 2006. "Speculation in Standard Auctions with Resale," Econometrica, Econometric Society, vol. 74(3), pages 753-769, May.
    16. Foulo, Tabo & Grafton, R. Quentin, 1998. "Structural Adjustment in Lesotho: An Evaluation," Journal of Policy Modeling, Elsevier, pages 791-814.
    17. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 72-110, January.
    18. Gupta, Madhurima & Lebrun, Bernard, 1999. "First price auctions with resale," Economics Letters, Elsevier, vol. 64(2), pages 181-185, August.
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    Citations

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    Cited by:

    1. Alexander Matros & Andriy Zapechelnyuk, 2010. "Competition of E-Commerce Intermediaries," Working Papers 675, Queen Mary University of London, School of Economics and Finance.
    2. Matros, Alexander & Zapechelnyuk, Andriy, 2011. "Optimal mechanisms for an auction mediator," International Journal of Industrial Organization, Elsevier, pages 426-431.
    3. Alexander Matros & Andriy Zapechelnyuk, 2009. "Competing Auction Houses," Discussion Papers 17, Kyiv School of Economics, revised Mar 2010.
    4. repec:pit:wpaper:202 is not listed on IDEAS
    5. Simon Loertscher & Andras Niedermayer, 2012. "Fee-Setting Mechanisms: On Optimal Pricing by Intermediaries and Indirect Taxation," Department of Economics - Working Papers Series 1162, The University of Melbourne.

    More about this item

    Keywords

    Internet auctions; Auctions with resale; Auction house; Listing fee; Closing fee; D44; C78; D82;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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