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The impact of buy-now features in pay-per-bid auctions


Reiner, Jochen; Natter, Martin; Skiera, Bernd (2014). The impact of buy-now features in pay-per-bid auctions. Journal of Management Information Systems, 31(2):77-104.

Abstract

Pay-per-bid auctions require all bidders to pay for every bid. However, paying bidding fees without receiving the auction item in return often causes high dissatisfaction among losers, resulting in heated discussions and high churn rates. To reduce these negative reactions, pay-per-bid auctioneers created the Buy-Now feature, which allows losers to put all or part of the bidding fees that they paid during an auction toward buying the auction item. Using unique data, including individual customer bidding histories and cost data from more than 6,800 pay-per-bid auctions, we find that, overall, the Buy-Now feature leads to more aggressive bidding behavior, attracts more bidders, increases loyalty, and results in a higher profit per auction. However, for voucher auctions that represent common value auctions, the Buy-Now feature causes a decrease in the number of bidders and the profit per auction, although we find an increase in the average number of bids per bidder. We also show theoretically that a bidder can pursue a risk-free bidding strategy. However, we find empirically that bidders rarely use this strategy.

Abstract

Pay-per-bid auctions require all bidders to pay for every bid. However, paying bidding fees without receiving the auction item in return often causes high dissatisfaction among losers, resulting in heated discussions and high churn rates. To reduce these negative reactions, pay-per-bid auctioneers created the Buy-Now feature, which allows losers to put all or part of the bidding fees that they paid during an auction toward buying the auction item. Using unique data, including individual customer bidding histories and cost data from more than 6,800 pay-per-bid auctions, we find that, overall, the Buy-Now feature leads to more aggressive bidding behavior, attracts more bidders, increases loyalty, and results in a higher profit per auction. However, for voucher auctions that represent common value auctions, the Buy-Now feature causes a decrease in the number of bidders and the profit per auction, although we find an increase in the average number of bids per bidder. We also show theoretically that a bidder can pursue a risk-free bidding strategy. However, we find empirically that bidders rarely use this strategy.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:2014
Deposited On:09 Dec 2016 11:28
Last Modified:08 Dec 2017 21:19
Publisher:Taylor & Francis
ISSN:0742-1222
Publisher DOI:https://doi.org/10.2753/MIS0742-1222310204
Other Identification Number:merlin-id:14184

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