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Buy it now: A hybrid market institution

Author

Listed:
  • Anderson, Steven
  • Friedman, Daniel
  • Milam, Garrett
  • Singh, Nirvikar

Abstract

This paper analyzes seller choices and outcomes in approximately 700 Internet auctions of a relatively homogeneous good. The ‘Buy it Now’ option allows the seller to convert the auction into a posted price market. We use a structural model to control for the conduct of the auction as well as product and seller characteristics. In explaining seller choices, we find that the ‘Buy it Now’ option was used more often by sellers with higher ratings and offering fewer units; and posted prices were more prevalent for used items. In explaining auction outcomes, we find that auctions with a ‘Buy it Now’ price had higher winning bids, ceteris paribus, whether or not the auction ended with the ‘Buy it Now’ offer being accepted, possibly reflecting signaling or bounded rationality. We also find that posting prices, by combining ‘Buy it Now’ and an equal starting price, was an effective strategy for sellers in the sample.

Suggested Citation

  • Anderson, Steven & Friedman, Daniel & Milam, Garrett & Singh, Nirvikar, 2007. "Buy it now: A hybrid market institution," MPRA Paper 4322, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:4322
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    References listed on IDEAS

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    Cited by:

    1. Anderson, Steven & Friedman, Daniel & Milam, Garrett & Singh, Nirvikar, 2007. "Seller strategies on eBay: Does size matter?," MPRA Paper 4324, University Library of Munich, Germany.
    2. Steven Anderson & Daniel Friedman & Garrett Milam & Nirvikar Singh, 2004. "Seller Strategies on eBay," Industrial Organization 0412004, University Library of Munich, Germany.

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    More about this item

    Keywords

    Market institutions; posted prices; auctions; e-commerce;
    All these keywords.

    JEL classification:

    • M0 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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