Auctions with a Buy Price

36 Pages Posted: 28 Jan 2005

See all articles by Stanley S. Reynolds

Stanley S. Reynolds

University of Arizona - Department of Economics

John Wooders

New York University Abu Dhabi; University Technology Sydney

Date Written: December 2004

Abstract

Internet auctions on eBay and Yahoo allow sellers to list their auctions with a buy-now option. In such auctions the seller sets a buy price at which a bidder may purchase the item immediately and end the auction. In the eBay version of a buy-now auction, the buy-now option disappears as soon as a bid is placed, while in the Yahoo version of the auction the buy-now option remains in effect throughout the auction. We characterize equilibrium bidding strategies in eBay and Yahoo buy-now auctions. We show that for both auctions, when bidders are risk averse, introducing a buy price raises seller revenue for a wide range of buy prices. In addition, when the reserve prices and the buy prices are the same in both auctions, the Yahoo format raises more revenue than the eBay format, while the auctions are utility equivalent from the bidders' perspective.

Suggested Citation

Reynolds, Stanley S. and Wooders, John C., Auctions with a Buy Price (December 2004). Eller College Working Paper No. 1010-05. Available at SSRN: https://ssrn.com/abstract=655362 or http://dx.doi.org/10.2139/ssrn.655362

Stanley S. Reynolds (Contact Author)

University of Arizona - Department of Economics ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

John C. Wooders

New York University Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates
+971 126285802 (Phone)

HOME PAGE: http://johnwooders.com

University Technology Sydney ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

HOME PAGE: http://johnwooders.com/

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