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
Date Written: October 22, 2008
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: Suggested Citation