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The Fixed Price Offer Mechanism in Trade Me Online Auctions

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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. We investigate 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 to a standard auction. The impact of the FPO option is reduced when the number of bidders increases.

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  • Seamus Hogan & Hamish Kidd & Laura Meriluoto & Andrew Smith, 2010. "The Fixed Price Offer Mechanism in Trade Me Online Auctions," Working Papers in Economics 10/51, University of Canterbury, Department of Economics and Finance.
    • Handle: RePEc:cbt:econwp:10/51
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    File URL: https://repec.canterbury.ac.nz/cbt/econwp/1051.pdf
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    1. repec:mea:ivswpa:489 is not listed on IDEAS
    2. Amir, R., 1996. "Cournot oligopoly and theory of supermodular games," LIDAM Reprints CORE 1228, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    4. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
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    More about this item

    Keywords

    fixed price offer; private value auction; on-line auction; optimal reserve price; second chance offer;
    All these keywords.

    JEL classification:

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

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