Auctions with a buy price: The case of reference-dependent preferences

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Auctions with a buy price: The case of reference-dependent preferences

In an auction with a buy price, the seller provides bidders with an option to end the auction early by accepting a transaction at a posted price. The ”BuyIt-Now” option on eBay is a leading example of an auction with a buy price. This paper develops a model of an auction with a buy price in which bidders use the auction’s reserve price and buy price to formulate a reference price. The model bot...

Reference-Dependent Preferences in First Price Auctions

In this paper I develop a Prospect theory based model to explain bidding in first-price auctions. As suggested in the literature, bidding occurs in these auctions in an inherently ambiguous environment due to lack of information about bidders’ risk attitudes and bidding strategies. I show that bidding in first-price auctions can be rationalized as a combination of reactions to underlying ambigu...

Auctions with a Buy Price ∗

Internet auctions on eBay and Yahoo allow sellers to list their auctions with a “buy-now” option. In such auctions the seller sets a buy price at which a bidder may purchase the item immediately and end the auction. In the eBay version of a buy-now auction, the buy-now option disappears as soon as a bid is placed, while in the Yahoo version of the auction the buy-now option remains in effect th...

Reference-Dependent Consumer Preferences and Price Setting

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