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The fixed price offer mechanism in Trade Me online auctions

Author

Listed:
  • Seamus Hogan
  • Hamish Kidd
  • Laura Meriluoto
  • Andrew Smith

Abstract

The fixed-price-offer (FPO) mechanism in Trade Me auctions allows sellers to make a take-it-or-leave-it offer at the conclusion of an unsuccessful auction. Weinvestigate the effects of the FPO option on strategies and outcomes in independent-value auctions. The FPO option induces some bidders with a value above the seller's reserve to wait for an FPO instead of bidding. Overall, the FPO option increases the probability of sale but reduces expected seller revenue compared with a standard auction. The impact of the FPO option is reduced when the number of bidders increases.

Suggested Citation

  • Seamus Hogan & Hamish Kidd & Laura Meriluoto & Andrew Smith, 2011. "The fixed price offer mechanism in Trade Me online auctions," New Zealand Economic Papers, Taylor & Francis Journals, vol. 45(3), pages 255-271, September.
    • Handle: RePEc:taf:nzecpp:v:45:y:2011:i:3:p:255-271
    DOI: 10.1080/00779954.2011.574679
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    References listed on IDEAS

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    1. Amir, R., 1996. "Cournot oligopoly and theory of supermodular games," LIDAM Reprints CORE 1228, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Amir, Rabah, 1996. "Cournot Oligopoly and the Theory of Supermodular Games," Games and Economic Behavior, Elsevier, vol. 15(2), pages 132-148, August.
    3. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    4. repec:mea:ivswpa:489 is not listed on IDEAS
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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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