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

Zhijuan Hong (), Ruhai Wu (), Yan Sun () and Kunxiang Dong ()
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Zhijuan Hong: Shandong University of Finance and Economics
Ruhai Wu: McMaster University
Yan Sun: Shandong University of Finance and Economics
Kunxiang Dong: Shandong University of Finance and Economics

Electronic Markets, 2020, vol. 30, issue 1, No 18, 163-179

Abstract: 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.

Keywords: Pricing rule; Auction mechanism; Bid dimensionality; Online outsourcing markets; Online outsourcing; Buyer-determined auctions (search for similar items in EconPapers)
JEL-codes: L81 L86 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s12525-019-00378-3

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