'Buy-it-Now' or 'Sell-it-Now' Auctions: Effects of Changing Bargaining Power in Sequential Trading Mechanisms

8 Pages Posted: 10 Dec 2015

See all articles by Tim Grebe

Tim Grebe

Humboldt University at Berlin

Radosveta Ivanova-Stenzel

Technische Universität Berlin (TU Berlin)

Sabine Kröger

Université Laval - Département d'Économique

Date Written: December 2015

Abstract

We study experimentally the effect of bargaining power in two sequential mechanisms that offer the possibility to trade at a fixed price before an auction. In the “Buy-It-Now” format, the seller has the bargaining power and offers a price prior to the auction; whereas in the “Sell-It-Now” format, it is the buyer. Both formats are extensively used in online and offline markets. Despite very different strategic implications for buyers and sellers, results from our experiment suggest no effects of bargaining power on aggregate outcomes. There is, however, substantial heterogeneity within sellers. Sellers who ask for high prices not only benefit from having the bargaining power but also earn revenue above those expected in the auction.

Keywords: Buy-It-Now price, Sell-It-Now price, private value auction, single item auction, sequential selling mechanism, fixed price, auction

JEL Classification: C72, C91, D44, D82

Suggested Citation

Grebe, Tim and Ivanova-Stenzel, Radosveta and Kroger, Sabine, 'Buy-it-Now' or 'Sell-it-Now' Auctions: Effects of Changing Bargaining Power in Sequential Trading Mechanisms (December 2015). Available at SSRN: https://ssrn.com/abstract=2700820 or http://dx.doi.org/10.2139/ssrn.2700820

Tim Grebe (Contact Author)

Humboldt University at Berlin ( email )

School of Business and Economics
Spandauer Str. 1
D-10178 Berlin
Germany

Radosveta Ivanova-Stenzel

Technische Universität Berlin (TU Berlin) ( email )

Straße des 17. Juni 135
Berlin, 10623
Germany

Sabine Kroger

Université Laval - Département d'Économique ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada

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