The Impact of the Irrelevant: Temporary Buy-Options and Bidding Behavior in Auctions
With a laboratory experiment, we study the impact of buy-options and the corresponding buy-price on revenues and bidding behavior in (online) proxy-auctions with independent private valuations. We show that temporary buy-options may reduce revenues for two reasons: At low buy-prices, the application...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2016-03-01
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| Series: | Games |
| Subjects: | |
| Online Access: | http://www.mdpi.com/2073-4336/7/1/8 |
| Summary: | With a laboratory experiment, we study the impact of buy-options and the corresponding buy-price on revenues and bidding behavior in (online) proxy-auctions with independent private valuations. We show that temporary buy-options may reduce revenues for two reasons: At low buy-prices, the application of the buy-option avoids revenue-enhancing bidding; at high buy-prices, bidders are reluctant to bid above the option price (even though the option is no longer available once an auction has started). The latter suggests a particular type of anchoring, where bidders use the buy-price to update their expectations about the strengths of their opponents. |
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| ISSN: | 2073-4336 |