Optimal Listing Strategy in Online Auctions
Forthcoming, International Economic Review
40 Pages Posted: 7 Jun 2016 Last revised: 23 Jun 2016
Date Written: April 6, 2016
This paper proposes a unified framework to completely characterize the sellers' optimal listing strategy in the online auction as a function of their rates of time impatience. Specifically, the fixed-price listing, the regular auction, and the buy-it-now auction are each a solution of the seller's single optimization problem under different values of the rate of inter-temporal discount: the perfectly patient seller adopts the regular auction; the sellers with a medium range of time impatience adopt the buy-it-now auction; and the most impatient of sellers adopt the fixed-price listing. Moreover, in the regular and buy-it-now auctions, the optimal reserve price is inversely related to the seller's inter-temporal discount factor, either within or across listing types.
This implies that the optimal reserve price for the buy-it-now auction is greater than that of the regular auction. These predictions offer clear empirical implications.
Keywords: online auction, reserve price, buy-it-now, time impatience, fixed-price sale, listing strategy
JEL Classification: B21, D44, L12, M2
Suggested Citation: Suggested Citation