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Optimal Fees in Internet Auctions

Author

Listed:
  • Alexander Matros

    (University of Pittsburgh)

  • Andriy Zapechelnyuk

    (Kyiv School of Economics)

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.

Suggested Citation

  • Alexander Matros & Andriy Zapechelnyuk, 2008. "Optimal Fees in Internet Auctions," Discussion Papers 3, Kyiv School of Economics.
    • Handle: RePEc:kse:dpaper:3
    Note: Published in Review of Economic Design, 12, 155-163 (2008)
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    File URL: http://repec.kse.org.ua/pdf/KSE_dp3.pdf
    File Function: Revised version, January 2008
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    References listed on IDEAS

    as
    1. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
    2. 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.
    3. Reisinger, Markus, 2004. "Two-Sided Markets with Negative Externalities," Discussion Papers in Economics 478, University of Munich, Department of Economics.
    4. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
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    6. Wilson, Robert B, 1985. "Incentive Efficiency of Double Auctions," Econometrica, Econometric Society, vol. 53(5), pages 1101-1115, September.
    7. Rod Garratt & Thomas Tröger, 2006. "Speculation in Standard Auctions with Resale," Econometrica, Econometric Society, vol. 74(3), pages 753-769, May.
    8. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    9. Horstmann, Ignatius J & LaCasse, Chantale, 1997. "Secret Reserve Prices in a Bidding Model with a Resale Option," American Economic Review, American Economic Association, vol. 87(4), pages 663-684, September.
    10. Giacomo Calzolari & Alessandro Pavan, 2006. "Monopoly with resale," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 362-375, June.
    11. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 72-110, January.
    12. McAfee, R. Preston & Vincent, Daniel, 1997. "Sequentially Optimal Auctions," Games and Economic Behavior, Elsevier, vol. 18(2), pages 246-276, February.
    13. Gupta, Madhurima & Lebrun, Bernard, 1999. "First price auctions with resale," Economics Letters, Elsevier, vol. 64(2), pages 181-185, August.
    14. Charles Zhoucheng Zheng, 2002. "Optimal Auction with Resale," Econometrica, Econometric Society, vol. 70(6), pages 2197-2224, November.
    15. Haile,P.A., 1999. "Auctions with resale," Working papers 33, Wisconsin Madison - Social Systems.
    16. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    Full references (including those not matched with items on IDEAS)

    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, vol. 29(4), pages 426-431, July.
    3. Alexander Matros & Andriy Zapechelnyuk, 2009. "Competing Auction Houses," Discussion Papers 17, Kyiv School of Economics, revised Mar 2010.
    4. Matros, Alexander & Zapechelnyuk, Andriy, 2011. "Optimal mechanisms for an auction mediator," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 426-431, July.
    5. Alexander Matros, 2006. "Optimal Mechanisms for an Auction Mediator," Working Paper 202, Department of Economics, University of Pittsburgh, revised Jan 2006.
    6. 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.

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    More about this item

    Keywords

    Internet auctions; auctions with resale; auction house; listing fee; closing fee;
    All these keywords.

    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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