Buy-It Now: One Dollar Auction Attractive?

Abstract

This paper discusses factors affecting the buy-it-now (BIN) market behavior in online auctions. The study includes performing a probit analysis — using a collected data set to find out how the independent variables affect the BIN behavior. Three most critical factors, starting price, BIN price and seller's reputation, were identified by the probit model for studying whether a BIN option was used or not. Then, the study uses a factorial design to identify impacts of important factors. The key findings are that the BIN price plays an important role in affecting the final price formation (47.6%) and a seller's reputation is critical to affect the performance of the bid duration (74.9%). These observations can help the predictions of the final price formation and bid duration in the future and further improve the efficiency of the BIN institution. Sellers should use an attractable BIN price to increase their revenue rate and keep an excellent reputation to reduce the bid duration. Since the starting price has only minor effects, the seller needs not to put much effort on that and the so-called “one dollar auction” seems to be a good idea.

• buy-it-now
• performance
• online auctions
• probit analysis
• bid arrival modeling
• factorial design experiment
• electronic commerce