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Buyer preferences for auction pricing rules in online outsourcing markets: fixed price vs. open price

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Abstract

Fixed-price and open-price are two mechanisms with different auction pricing rules that are popularly used in online outsourcing markets. This research empirically examines the determinants of buyers’ choices between the two mechanisms with secondary data from an online outsourcing market. We found that buyers tend to use open-price auctions with large size projects, while their propensity to use fixed-price auctions increases when they are more familiar with the project, have more trading experience in the market, or less trust in the service providers. Moreover, buyer experience has significant moderating effects on the impact of project size and buyer distrust. Our empirical results reveal a unique insight that incomplete information and information asymmetry, rather than the expected buyer surplus, are critical factors to buyers’ preferences on bid dimensionality.

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Notes

  1. https://www.upwork.com/press/2018/10/31/freelancing-in-america-2018/, accessed in April 2019.

  2. http://www.epwk.com/, accessed in May 2019.

  3. http://www.witmart.com/about/overview.html, accessed in April 2019.

  4. Working duration refers to the time the service provider plans to take to complete the project.

  5. https://tech.qq.com/a/20101118/000351.htm, accessed in November 2019.

  6. For variables that contain zero (BuyerExp), the lowest non-zero value (+1) was added before logarithm transformation (Y. Hong et al. 2015; McCune and Grace 2002).

  7. The CFB-generating page is a page the buyer uses to create a CFB. It is different from the “CFB” page (examples shown in Fig. 1) that is displayed to service providers.

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Acknowledgements

The authors would like to thank the editor as well as the reviewers for the insightful comments on the refinement of the paper. We are very grateful for the support from NSERC Strategic Partnership Grant (No.: 494083-16), National Natural Science Foundation (No.: 71902097, 71572043), Natural Science Foundation of Shandong Province (No.: ZR2019PG003, ZR2019MG037), Social Science Planning and Research Project of Shandong Province (No.: 19DGLJ03), and Higher Education Research and Planning Project of Shandong Province (No.: J18RA135).

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  1. School of Management Science and Engineering, Shandong University of Finance and Economics, East Erhuan Road, Jinan, 250014, China

    Zhijuan Hong, Yan Sun & Kunxiang Dong

  2. DeGroote School of Business, McMaster University, 1280 Main Street West, Hamilton, L8S 4M4, Canada

    Ruhai Wu

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  1. Zhijuan Hong
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Hong, Z., Wu, R., Sun, Y. et al. Buyer preferences for auction pricing rules in online outsourcing markets: fixed price vs. open price. Electron Markets 30, 163–179 (2020). https://doi.org/10.1007/s12525-019-00378-3

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