A dynamic model of auctions with buy-it-now: theory and evidence
In the ascending-price auctions with Yahoo!-type buy-it-now (BIN), we characterize and derive the closed-form solution for the optimal bidding strategy of the bidder and the optimal BIN price of the seller when they are both risk-averse. The seller is shown to be strictly better o with the BIN option, while the bidders are better o only when their valuation is greater than a threshold value. The theory also implies that the expected transaction price is higher in an auction with an optimal BIN price than one without a BIN. This prediction is conrmed by our data collected from Taiwan's Yahoo! auctions of Nikon digital cameras.
|Date of creation:||03 Apr 2006|
|Date of revision:||24 Nov 2011|
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