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The Fixed Price Offer Mechanism in Trade Me Online Auctions

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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. 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: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/1051.pdf
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    1. repec:mea:ivswpa:489 is not listed on IDEAS
    2. Amir, Rabah, 1996. "Cournot Oligopoly and the Theory of Supermodular Games," Games and Economic Behavior, Elsevier, vol. 15(2), pages 132-148, August.
    3. 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;

    JEL classification:

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

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