The Impact of the Irrelevant: Temporary Buy-Options and Bidding Behavior in Auctions

Ronald Peeters, Martin Strobel, Dries Vermeulen and Markus Walzl

Games, 2016, vol. 7, issue 1, 1-19

Abstract: With a laboratory experiment, we study the impact of buy-options and the corresponding buy-price on revenues and bidding behavior in (online) proxy-auctions with independent private valuations. We show that temporary buy-options may reduce revenues for two reasons: At low buy-prices, the application of the buy-option avoids revenue-enhancing bidding; at high buy-prices, bidders are reluctant to bid above the option price (even though the option is no longer available once an auction has started). The latter suggests a particular type of anchoring, where bidders use the buy-price to update their expectations about the strengths of their opponents.

Keywords: buy-options; online auctions; experiments; anchoring; C72; C91; D44; D82 (search for similar items in EconPapers)
JEL-codes: C C7 C70 C71 C72 C73 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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