Empirical Testing of Reference Price Effect of Buy Now Prices in Internet Auctions
Peter T. L. Popkowski Leszczyc
University of Alberta - Department of Marketing, Business Economics & Law
McGill University - Desautels Faculty of Management
October 22, 2008
Journal of Retailing, Forthcoming
Retailers selling items through Internet auctions frequently use buy-now prices (BNPs), which allow the immediate selling of an item to consumers at a fixed price. Previous research has proposed several theories of the usage of BNPs by bidders. We study the usage of BNPs from a seller's point of view. We propose that a retailer may use BNPs as external reference prices, influencing bidders' valuations in Internet auctions. We focus on the effect of BNPs on bidders' willingness to pay (WTP) and study under what conditions a BNP can be effectively used as an external reference price. Results of two empirical studies clearly indicate that BNPs have a reference price effect. In addition, we find that this effect is moderated by (1) the difficulty of value assessment and (2) product value.
Number of Pages in PDF File: 35
Keywords: Internet Auctions, Buy-now Prices, Reference Price Effect, Value Uncertainty
JEL Classification: C93, D44, M31
Date posted: April 15, 2005 ; Last revised: February 25, 2015
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