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Games 2016, 7(1), 8; doi:10.3390/g7010008

The Impact of the Irrelevant: Temporary Buy-Options and Bidding Behavior in Auctions

1
Department of Economics, Maastricht University, P.O. Box 616, Maastricht 6200 MD, The Netherlands
2
Department of Quantitative Economics, Maastricht University, P.O. Box 616, Maastricht 6200 MD, The Netherlands
3
Department of Economics, Innsbruck University, Universitätsstr. 15, Innsbruck A-6020, Austria
*
Author to whom correspondence should be addressed.
Academic Editors: Thomas D. Jeitschko and Mark J. Tremblay
Received: 1 February 2016 / Revised: 17 February 2016 / Accepted: 17 February 2016 / Published: 1 March 2016
(This article belongs to the Special Issue Game Theoretic Analyses of Multi-Sided Markets)
View Full-Text   |   Download PDF [262 KB, uploaded 1 March 2016]   |  

Abstract

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. View Full-Text
Keywords: buy-options; online auctions; experiments; anchoring; C72; C91; D44; D82 buy-options; online auctions; experiments; anchoring; C72; C91; D44; D82
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Peeters, R.; Strobel, M.; Vermeulen, D.; Walzl, M. The Impact of the Irrelevant: Temporary Buy-Options and Bidding Behavior in Auctions. Games 2016, 7, 8.

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