Buy-Price Options at Online Auctions in the Presence of Competing Posted-Price Markets

Various buy-price options occupy a significant portion of transactions in major online auction sites, although their posted-price attribute seems to run counter to the virtue of the auction mechanism. To investigate their influence on the behavior of bidders and sellers, we examine auctions at Yahoo! and eBay in the presence of competing posted-price markets. The analysis of the equilibrium strategies of auction participants reveals some intriguing points including the fact that totally ineffective posted-price markets make buy-price options unnecessary to sellers. Additionally, the durations and the expected revenue of auctions are compared to illuminate sellers' motivation to adopt buy-price options