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Empirical Testing of Reference Price Effect of Buy Now Prices in Internet Auctions

Journal of Retailing, Forthcoming

35 Pages Posted: 15 Apr 2005 Last revised: 25 Feb 2015

Peter T. L. Popkowski Leszczyc

University of Alberta - Department of Marketing, Business Economics & Law

Chun Qiu

McGill University - Desautels Faculty of Management

Yongfu He

Monash University

Date Written: October 22, 2008

Abstract

Retailers selling items through Internet auctions frequently use buy-now prices (BNPs), which allow the immediate selling of an item to consumers at a fixed price. Previous research has proposed several theories of the usage of BNPs by bidders. We study the usage of BNPs from a seller's point of view. We propose that a retailer may use BNPs as external reference prices, influencing bidders' valuations in Internet auctions. We focus on the effect of BNPs on bidders' willingness to pay (WTP) and study under what conditions a BNP can be effectively used as an external reference price. Results of two empirical studies clearly indicate that BNPs have a reference price effect. In addition, we find that this effect is moderated by (1) the difficulty of value assessment and (2) product value.

Keywords: Internet Auctions, Buy-now Prices, Reference Price Effect, Value Uncertainty

JEL Classification: C93, D44, M31

Suggested Citation

Popkowski Leszczyc, Peter T. L. and Qiu, Chun and He, Yongfu, Empirical Testing of Reference Price Effect of Buy Now Prices in Internet Auctions (October 22, 2008). Journal of Retailing, Forthcoming. Available at SSRN: https://ssrn.com/abstract=689121

Peter T. L. Popkowski Leszczyc (Contact Author)

University of Alberta - Department of Marketing, Business Economics & Law ( email )

Edmonton, Alberta T6G 2R6
Canada
780-492-1866 (Phone)
780-492-3325 (Fax)

HOME PAGE: http://www.bus.ualberta.ca/ppopkowski/

Chun Qiu

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada

Yongfu He

Monash University ( email )

Sir John Monash Road
Caulfield East, Victoria 3163
Australia

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