Factors Affecting Price Setting in Online Auctions

Abstract:     
This paper provides research into the effects of product class and seller reputation on price-setting in online auctions. Sellers may offer price information to potential bidders through buy-now prices (BNPs) and starting prices (SPs). In two experiments, the authors show that for products with values that are difficult to assess, such price information affects bidders’ perception and willingness to pay (WTP), and as such are subject to the moderating effects of product class and seller reputation. In addition, the authors model sellers’ decision-making in setting the SP and BNP as a two-stage process, using data collected from eBay auctions. In the first stage, sellers decide whether to set a BNP. In stage two, they decide on the level of the SP. Results show that sellers are more likely to set a BNP when they are more reputable and when the product is a high-end one. The proposed model provides guidelines for marketing and auction practitioners in setting prices.

Number of Pages in PDF File: 32

Keywords: Online auctions, pricing, buy-now price, starting price

JEL Classification: C91, C99, D44, M31, M39

Accepted Paper Series