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Auctions with a buy price

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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.

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Authors and Affiliations

  1. Department of Economics, University of Arizona, Tucson, AZ, 85721-0108, USA

    Stanley S. Reynolds & John Wooders

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  1. Stanley S. Reynolds
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  2. John Wooders
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Correspondence to John Wooders.

Additional information

Part of this work was completed while Reynolds was a visitor at Instituto de Analisys Economico in Barcelona and while Wooders was a visitor at Hong Kong University of Science and Technology. We are grateful to these institutions for their hospitality.

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Reynolds, S.S., Wooders, J. Auctions with a buy price. Econ Theory 38, 9–39 (2009). https://doi.org/10.1007/s00199-006-0182-7

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  • DOI: https://doi.org/10.1007/s00199-006-0182-7

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