Auctions with a buy price

Stanley S. Reynolds, John Wooders

Research output: Contribution to journalArticle

Abstract

eBay and Yahoo allow sellers to list their auctions with a buy price at which a bidder may purchase the item immediately. On eBay, the buy-now option disappears once a bid is placed, while on Yahoo the buy-now option remains in effect throughout the auction. We show that when bidders are risk averse, both types of auctions raise seller revenue for a wide range of buy prices. The Yahoo format raises more revenue than the eBay format when bidders have either CARA or DARA. Bidders with DARA prefer the eBay auction, while bidders with CARA are indifferent between the two.

Original languageEnglish (US)
Pages (from-to)9-39
Number of pages31
JournalEconomic Theory
Volume38
Issue number1
DOIs
Publication statusPublished - Jan 1 2009

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Keywords

  • Auction
  • Buy price
  • eBay
  • Risk aversion
  • Yahoo

ASJC Scopus subject areas

  • Economics and Econometrics

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