The results from this study indicate that with proxy bidding, temporary and permanent buy prices are equally effective at raising revenue, but temporary buy prices result in more early bidding.
However, as our focus here is on different types of buy prices, and as auctions with buy prices are more complicated than those without (particularly in the case of proxy bidding), we have chosen to include only those sessions in which subjects were able to gain experience in a simpler environment before moving to a more complicated one with buy prices.
The introduction of a buy price (whether temporary or permanent) to risk-averse bidders increases revenue for a wide range of buy prices, and when bidders have either CARA or DARA, the optimal introduction of a permanent buy price results in higher revenue than that of a temporary 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.
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.
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.