A Dynamic Model of Auctions with Buy‐It‐Now: Theory and Evidence

37 Pages Posted: 12 Jul 2013

See all articles by Jong-Rong Chen

Jong-Rong Chen

National Central University at Taiwan

Kong-Pin Chen

Academia Sinica - Research Center for Humanities and Social Sciences; National Taiwan University - Department of Economics

Chien-Fu Chou

National Taiwan University - Department of Economics

Ching-I Huang

National Taiwan University - Department of Economics

Date Written: June 2013

Abstract

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 bidders and the optimal BIN price of the seller when they are both risk‐averse. The seller is shown to be strictly better off with the BIN option, while the bidders are better off only when their valuation is high enough. The theory also implies that the expected transaction price is higher in an auction with an optimal BIN price than one without a BIN option. This prediction is confirmed by our data collected from Taiwan's Yahoo! auctions.

Suggested Citation

Chen, Jong-Rong and Chen, Kong-Pin and Chou, Chien-Fu and Huang, Ching-I, A Dynamic Model of Auctions with Buy‐It‐Now: Theory and Evidence (June 2013). The Journal of Industrial Economics, Vol. 61, Issue 2, pp. 393-429, 2013. Available at SSRN: https://ssrn.com/abstract=2292817 or http://dx.doi.org/10.1111/joie.12018

Jong-Rong Chen (Contact Author)

National Central University at Taiwan ( email )

No. 300, Zhongda Road
Chung-Li Taiwan, 32054
Taiwan

Kong-Pin Chen

Academia Sinica - Research Center for Humanities and Social Sciences ( email )

RCHSS
Academia Sinica
Nankang, Taipei, 11529
Taiwan
886 2 2789 8160 (Phone)
886 2 2785 4160 (Fax)

HOME PAGE: http://idv.sinica.edu.tw/kongpin/

National Taiwan University - Department of Economics

21 Hsiu Chow Rd
Taipei, 10020
Taiwan

Chien-Fu Chou

National Taiwan University - Department of Economics ( email )

21 Hsiu Chow Rd
Taipei, 10020
Taiwan

Ching-I Huang

National Taiwan University - Department of Economics ( email )

21 Hsiu Chow Rd
Taipei, 10020
Taiwan

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