One of these innovations is the development of the buy price. A buy price allows the seller, during the listing of his or her item, to indicate a price at which he or she would be willing to sell.
The buy price has been implemented by different online auction sites using various rules.
The popularity of the buy price raises several interesting questions.
The experiments discussed here make use of three types of auctions: auctions with no buy price, auctions with a temporary buy price that disappears once a bid is made, and auctions with a permanent buy price that is available throughout the entire auction.
Mathews (2004) discusses (as originally described by LabX, a site for buying and selling of scientific equipment) four possible factors that might motivate a buyer to exercise a buy price when it is offered: time discounting, a reduction in price uncertainty, bidder risk aversion, and lower monitoring costs.
The presence of bidder risk aversion as a motivation for the use of a buy price has been explored theoretically by Budish and Takeyama (2001), Hidvegi et al.
Shahriar and Wooders (2007) present the results of an experiment that examines a temporary buy price in auctions with both private and common values.
Ivanova-Stenzel and Kroger (2008) explore a temporary buy price both theoretically and experimentally.
(3) Mathews (2004) examines a temporary buy price theoretically and finds that when the seller and/or the bidders are time impatient, a seller can be motivated to choose a buy price that is exercised with positive probability by the bidders.
This study is an exploration into the revenue, utilization, bid timing, and efficiency differences that arise when using a permanent or temporary buy price and how these differences are affected by the presence or absence of proxy bidding in a controlled laboratory setting.
and permanent buy price in a single institution that captured many of the characteristics of both eBay and Yahoo!.
After observing the results from the first set of experiments, we decided to further explore the effects of a buy price in a setting that more closely matches that of the institution used by eBay, the current market leader in the United States.