Price

The buy price has been implemented by different online auction sites using various rules.

The popularity of the buy price raises several interesting questions.

The experiments discussed here make use of three types of auctions: auctions with no buy price, auctions with a temporary buy price that disappears once a bid is made, and auctions with a permanent buy price that is available throughout the entire auction.

First, seller revenue is higher in auctions with buy prices than in auctions without, and revenue is higher when the buy price is permanent rather than temporary.

Mathews (2004) discusses (as originally described by LabX, a site for buying and selling of scientific equipment) four possible factors that might motivate a buyer to exercise a buy price when it is offered: time discounting, a reduction in price uncertainty, bidder risk aversion, and lower monitoring costs.

The presence of bidder risk aversion as a motivation for the use of a buy price has been explored theoretically by Budish and Takeyama (2001), Hidvegi et al.

Shahriar and Wooders (2007) present the results of an experiment that examines a temporary buy price in auctions with both private and common values.