Abstract

https://ssrn.com/abstract=1958032
 
 

References (35)



 


 



Buy-It-Now or Take-a-Chance: Price Discrimination through Randomized Auctions


Elisa Celis


University of Washington

Gregory Lewis


Harvard University; National Bureau of Economic Research (NBER)

Markus M. Mobius


University of Michigan at Ann Arbor - School of Information; Microsoft Corporation - Microsoft Research New England; National Bureau of Economic Research (NBER)

Hamid Nazerzadeh


University of Southern California - Marshall School of Business

October 1, 2011

NET Institute Working Paper No. 11-21

Abstract:     
Increasingly detailed consumer information makes sophisticated price discrimination possible. At fine levels of aggregation, demand may not obey standard regularity conditions. We propose a new randomized sales mechanism for such environments. Bidders can "buy-it-now" at a posted price, or "take-a-chance" in an auction where the top d > 1 bidders are equally likely to win. The randomized allocation incentivizes high valuation bidders to buy-it-now. We analyze equilibrium behavior, and apply our analysis to advertiser bidding data from Microsoft Advertising Exchange. In counterfactual simulations, our mechanism increases revenue by 4.4% and consumer surplus by 14.5% compared to an optimal second-price auction.

Number of Pages in PDF File: 36

Keywords: Advertising, Auctions, Mechanism Design, Price Discrimination

JEL Classification: D44, L86


Open PDF in Browser Download This Paper

Date posted: November 24, 2011 ; Last revised: July 31, 2014

Suggested Citation

Celis, Elisa and Lewis, Gregory and Mobius, Markus M. and Nazerzadeh, Hamid, Buy-It-Now or Take-a-Chance: Price Discrimination through Randomized Auctions (October 1, 2011). NET Institute Working Paper No. 11-21. Available at SSRN: https://ssrn.com/abstract=1958032 or http://dx.doi.org/10.2139/ssrn.1958032

Contact Information

Elisa Celis
University of Washington ( email )
Seattle, WA 98195
United States
Gregory Lewis (Contact Author)
Harvard University ( email )
Littauer Center
Cambridge, MA 02138
United States
617-496-1526 (Phone)
HOME PAGE: http://www.economics.harvard.edu/faculty/lewis
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Markus M. Mobius
University of Michigan at Ann Arbor - School of Information ( email )
304 West Hall
550 East University
Ann Arbor, MI 48109-1092
United States
HOME PAGE: http://www.markusmobius.org
Microsoft Corporation - Microsoft Research New England ( email )
One Memorial Drive, 14th Floor
Cambridge, MA 02142
United States
HOME PAGE: http://www.markusmobius.org
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
HOME PAGE: http://www.markusmobius.org
Hamid Nazerzadeh
University of Southern California - Marshall School of Business ( email )
Bridge Memorial Hall
Los Angeles, CA 90089
United States
HOME PAGE: http://www-bcf.usc.edu/~nazerzad/

Feedback to SSRN


Paper statistics
Abstract Views: 779
Downloads: 157
Download Rank: 139,962
References:  35