Competitive Reasons for the Name-Your-Own-Price Channel

This paper shows that the Name-Your-Own-Price (NYOP) business model can help soften competition. When consumers differ in their frictional costs (i.e., the shopping hassle) they experience when bidding at a NYOP retailer, the NYOP format can be a mechanism for differentiating a retailer from a posted-price rival. Beyond providing a motivation for using a NYOP mechanism, competition also has important implications for the optimal structure of the NYOP format. For example, this paper shows that prohibiting re-bidding may benefit a NYOP firm by reducing price rivalry.