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The fixed price offer mechanism in Trade Me online auctions

Author

Listed:
  • Seamus Hogan
  • Hamish Kidd
  • Laura Meriluoto
  • Andrew Smith

Abstract

The fixed-price-offer (FPO) mechanism in Trade Me auctions allows sellers to make a take-it-or-leave-it offer at the conclusion of an unsuccessful auction. Weinvestigate the effects of the FPO option on strategies and outcomes in independent-value auctions. The FPO option induces some bidders with a value above the seller's reserve to wait for an FPO instead of bidding. Overall, the FPO option increases the probability of sale but reduces expected seller revenue compared with a standard auction. The impact of the FPO option is reduced when the number of bidders increases.

Suggested Citation

  • Seamus Hogan & Hamish Kidd & Laura Meriluoto & Andrew Smith, 2011. "The fixed price offer mechanism in Trade Me online auctions," New Zealand Economic Papers, Taylor & Francis Journals, vol. 45(3), pages 255-271, September.
    • Handle: RePEc:taf:nzecpp:v:45:y:2011:i:3:p:255-271
    DOI: 10.1080/00779954.2011.574679
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    References listed on IDEAS

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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