IDEAS home Printed from https://ideas.repec.org/p/cir/cirwor/2023s-13.html
   My bibliography  Save this paper

Risk, Reward and Uncertainty in Buyer-Seller Transactions

Author

Listed:
  • Radosveta Ivanova-Stenzel
  • Sabine Kröger

Abstract

– The Seller’s View on Combining Posted Prices and Auctions – In Buy-It-Now auctions, sellers can post a take-it-or-leave-it price offer prior to an auction. While the literature almost exclusively looks at buyers in such combined mechanisms, the current paper summarizes results from the sellers’ point of view. Buy-It-Now auctions are complex mechanisms and therefore quite challenging for sellers. The paper discusses the seller’s curse, a bias that sellers might fall prey to in such combined mechanisms, and how experience counterbalances this bias. Furthermore, the paper explores the role of information and bargaining power on behavior and profit prospects in Buy-It-Now auctions. – The Seller’s View on Combining Posted Prices and Auctions – Dans les enchères de type "Achat immédiat", les vendeurs peuvent publier une offre de prix à prendre ou à laisser avant l'enchère. Alors que la littérature s'intéresse presque exclusivement aux acheteurs dans ces mécanismes combinés, le présent document résume les résultats du point de vue des vendeurs. Les enchères de type "Achat immédiat" sont des mécanismes complexes et posent un grand défi pour les vendeurs. Dans l'article, nous traitons de la malédiction du vendeur, un biais dont les vendeurs peuvent être victimes dans ces mécanismes combinés. Nous présenterons également comment l'expérience que les vendeurs ont avec le mécanisme contrebalance ce biais. En outre, nous explorons le rôle de l'information et du pouvoir de négociation sur le comportement des vendeurs et leurs perspectives de profit dans les enchères de type "Achat immédiat".

Suggested Citation

  • Radosveta Ivanova-Stenzel & Sabine Kröger, 2023. "Risk, Reward and Uncertainty in Buyer-Seller Transactions," CIRANO Working Papers 2023s-13, CIRANO.
    • Handle: RePEc:cir:cirwor:2023s-13
    as

    Download full text from publisher

    File URL: https://cirano.qc.ca/files/publications/2023s-13.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Benjamin Enke & Florian Zimmermann, 2019. "Correlation Neglect in Belief Formation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(1), pages 313-332.
    2. Shunda, Nicholas, 2009. "Auctions with a buy price: The case of reference-dependent preferences," Games and Economic Behavior, Elsevier, vol. 67(2), pages 645-664, November.
    3. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-194, March.
    4. Binmore, K & Shaked, A & Sutton, J, 1985. "Testing Noncooperative Bargaining Theory: A Preliminary Study," American Economic Review, American Economic Association, vol. 75(5), pages 1178-1180, December.
    5. Mitzkewitz, Michael & Nagel, Rosemarie, 1993. "Experimental Results on Ultimatum Games with Incomplete Information," International Journal of Game Theory, Springer;Game Theory Society, vol. 22(2), pages 171-198.
    6. Kevin Hasker & Robin Sickles, 2010. "eBay in the Economic Literature: Analysis of an Auction Marketplace," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 37(1), pages 3-42, August.
    7. Silvana Krasteva & Huseyin Yildirim, 2012. "Payoff uncertainty, bargaining power, and the strategic sequencing of bilateral negotiations," RAND Journal of Economics, RAND Corporation, vol. 43(3), pages 514-536, September.
    8. Einhorn, Hj & Hogarth, Rm, 1981. "Behavioral Decision-Theory - Processes Of Judgment And Choice," Journal of Accounting Research, Wiley Blackwell, vol. 19(1), pages 1-31.
    9. Liran Einav & Chiara Farronato & Jonathan Levin & Neel Sundaresan, 2018. "Auctions versus Posted Prices in Online Markets," Journal of Political Economy, University of Chicago Press, vol. 126(1), pages 178-215.
    10. Stanley Reynolds & John Wooders, 2009. "Auctions with a buy price," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(1), pages 9-39, January.
    11. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    12. Grebe, Tim & Ivanova-Stenzel, Radosveta & Kröger, Sabine, 2021. "How do sellers benefit from Buy-It-Now prices in eBay auctions?," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 189-205.
    13. Jérémie Gallien & Shobhit Gupta, 2007. "Temporary and Permanent Buyout Prices in Online Auctions," Management Science, INFORMS, vol. 53(5), pages 814-833, May.
    14. Bauner, Christoph, 2015. "Mechanism choice and the buy-it-now auction: A structural model of competing buyers and sellers," International Journal of Industrial Organization, Elsevier, vol. 38(C), pages 19-31.
    15. Ivanova-Stenzel, Radosveta & Kröger, Sabine, 2008. "Price formation in a sequential selling mechanism," Journal of Economic Behavior & Organization, Elsevier, vol. 67(3-4), pages 832-843, September.
    16. Jong-Rong Chen & Kong-Pin Chen & Chien-Fu Chou & Ching-I Huang, 2013. "A Dynamic Model of Auctions with Buy-It-Now: Theory and Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 61(2), pages 393-429, June.
    17. Timothy Mathews & Brett Katzman, 2006. "The role of varying risk attitudes in an auction with a buyout option," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(3), pages 597-613, April.
    18. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    19. Timothy Mathews, 2004. "The Impact of Discounting on an Auction with a Buyout Option: a Theoretical Analysis Motivated by eBay’s Buy-It-Now Feature," Journal of Economics, Springer, vol. 81(1), pages 25-52, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Grebe, Tim & Ivanova-Stenzel, Radosveta & Kröger, Sabine, 2021. "How do sellers benefit from Buy-It-Now prices in eBay auctions?," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 189-205.
    2. Ivanova-Stenzel, Radosveta & Grebe, Tim & Kröger, Sabine, 2019. "How do sellers benefit from Buy-It-Now prices in eBay auctions?," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203606, Verein für Socialpolitik / German Economic Association.
    3. Chen, Kong-Pin & Lai, Hung-pin & Yu, Ya-Ting, 2018. "The seller's listing strategy in online auctions: Evidence from eBay," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 107-144.
    4. Alexander Maslov, 2023. "Auctions versus posted prices in the revenue management of limited inventory," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1476-1490, April.
    5. Kong‐Pin Chen & Szu‐Hsien Ho & Chi‐Hsiang Liu & Chien‐Ming Wang, 2017. "The Optimal Listing Strategies In Online Auctions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(2), pages 421-437, May.
    6. Tim Grebe & Radosveta Ivanova-Stenzel & Sabine Kröger, 2009. "Buy-it-Now Prices in eBay Auctions-The Field in the Lab," Cahiers de recherche 0950, CIRPEE.
    7. Alexander Maslov, 2022. "Competition in online markets with auctions and posted prices," Journal of Economics, Springer, vol. 137(2), pages 145-169, October.
    8. Shunda, Nicholas, 2009. "Auctions with a buy price: The case of reference-dependent preferences," Games and Economic Behavior, Elsevier, vol. 67(2), pages 645-664, November.
    9. Popkowski Leszczyc, Peter T.L. & Qiu, Chun & He, Yongfu, 2009. "Empirical Testing of the Reference-Price Effect of Buy-Now Prices in Internet Auctions," Journal of Retailing, Elsevier, vol. 85(2), pages 211-221.
    10. Axel Ockenfels & David Reiley & Abdolkarim Sadrieh, 2006. "Online Auctions," NBER Working Papers 12785, National Bureau of Economic Research, Inc.
    11. Zhang, Hanzhe, 2021. "The optimal sequence of prices and auctions," European Economic Review, Elsevier, vol. 133(C).
    12. Shunda, Nicholas, 2009. "Auctioning with Aspirations: Keep Them Low (Enough)," MPRA Paper 16242, University Library of Munich, Germany.
    13. Wang, Hong, 2017. "Analysis and design for multi-unit online auctions," European Journal of Operational Research, Elsevier, vol. 258(3), pages 1191-1203.
    14. Ivanova-Stenzel, Radosveta & Kröger, Sabine, 2008. "Price formation in a sequential selling mechanism," Journal of Economic Behavior & Organization, Elsevier, vol. 67(3-4), pages 832-843, September.
    15. Kevin Hasker & Robin Sickles, 2010. "eBay in the Economic Literature: Analysis of an Auction Marketplace," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 37(1), pages 3-42, August.
    16. Alexander Maslov, 2020. "A Note on Buyers’ Behavior in Auctions with an Outside Option," Games, MDPI, vol. 11(3), pages 1-9, July.
    17. William E. Gryc, 2020. "Revenue in first-price auctions with a buy-out price and risk-averse bidders," Journal of Economics, Springer, vol. 129(2), pages 103-142, March.
    18. Anwar, Sajid & Zheng, Mingli, 2015. "Posted price selling and online auctions," Games and Economic Behavior, Elsevier, vol. 90(C), pages 81-92.
    19. Daniel Montanera & Abhay Nath Mishra & T. S. Raghu, 2022. "Mitigating Risk Selection in Healthcare Entitlement Programs: A Beneficiary-Level Competitive Bidding Approach," Information Systems Research, INFORMS, vol. 33(4), pages 1221-1247, December.
    20. Scott Duke Kominers & Alexander Teytelboym & Vincent P Crawford, 2017. "An invitation to market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(4), pages 541-571.

    More about this item

    Keywords

    asymmetric information; laboratory experiment; field experiment; auction; BIN-auction; Buy-It-Now auction; BIN-price; Buy-It-Now price; combined mechanism; information asymétrique; expérience en laboratoire; expérience sur le terrain; enchère; enchère BIN; enchère Buy-It-Now; prix BIN; prix Buy-It-Now; mécanisme combiné; enchère de type Achat immédiat; prix Achat immédiat;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cir:cirwor:2023s-13. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Webmaster (email available below). General contact details of provider: https://edirc.repec.org/data/ciranca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.