Economic Theory

, Volume 38, Issue 1, pp 9–39 | Cite as

Auctions with a buy price

Symposium

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.

Keywords

Auction Buy price Yahoo eBay Risk aversion 

JEL Classification Numbers

D44 D82 L86 

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Copyright information

© Springer-Verlag 2006

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of ArizonaTucsonUSA

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