The fixed price offer mechanism in Trade Me online auctions

Seamus Hogan, Hamish Kidd, Laura Meriluoto and Andrew Smith

New Zealand Economic Papers, 2011, vol. 45, issue 3, 255-271

Abstract: The fixed-price-offer (FPO) mechanism in Trade Me auctions allows sellers to make a take-it-or-leave-it offer at the conclusion of an unsuccessful auction. Weinvestigate the effects of the FPO option on strategies and outcomes in independent-value auctions. The FPO option induces some bidders with a value above the seller's reserve to wait for an FPO instead of bidding. Overall, the FPO option increases the probability of sale but reduces expected seller revenue compared with a standard auction. The impact of the FPO option is reduced when the number of bidders increases.

Date: 2011
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Working Paper: The Fixed Price Offer Mechanism in Trade Me Online Auctions (2010)
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DOI: 10.1080/00779954.2011.574679

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