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When bidders are risk averse, Reynolds and Wooders (2009) find that a sufficient condition for a buy price to increase expected revenue in TEMP is that the buy price be strictly greater than [[delta].
The introduction of a buy price (whether temporary or permanent) to risk-averse bidders increases revenue for a wide range of buy prices, and when bidders have either CARA or DARA, the optimal introduction of a permanent buy price results in higher revenue than that of a temporary buy price.
a permanent buy price without [mandatory] proxy bidding) yields a higher or lower price in our data than the eBay combination (a temporary buy price with proxy bidding) we construct two indicator variables that define those two cells in our design and then run an ordinary least squares regression of price on the Yahoo
Note that whether or not a given bidder is BPE is exogenous and determined by the random number drawn for that subject compared to the buy price in effect for that period.
What we find is that buy price type never makes a difference, that there is a strong and significant effect of having two BPE bidders, that there is always (across both institutions as well as in the pooled data) a difference for a buy price of 25 versus a buy price of 50, and that there is a difference for a buy price of 50 versus a buy price of 75 only in the pooled data.
Note that in some cases the presence of a buy price appears to improve efficiency even in cases where there are no BPE bidders (e.
This provides some support that the increases in efficiency we observe in our buy price auctions are not merely driven by experimental design or subject pool differences between their study and ours.
Some pairs of values for the two bidders participating in the auction could result in instances where the number of BPE bidders depends upon the level of the buy price (25, 50, 75), while others are deterministic.
TABLE 1 Experimental Design Session Institution Buy Price Type A NOPROXY TEMP B NOPROXY TEMP C PROXY TEMP D PROXY TEMP E NOPROXY PERM F NOPROXY PERM G PROXY PERM H PROXY PERM TABLE 2 Mean Revenue (SD) Relative to Corresponding NO Auction, by Institution, Buy Price Type, and Buy Price Level Buy Price Level Buy Price Institution Type OVERALL 25 POOLED PERM 5.
The experiments described here are an attempt to explore buy prices in institutions similar to those that have developed in naturally occurring markets, and are therefore not designed to strictly test any particular theoretical model.
In the theoretical literature examining buy prices, the auction has typically been modeled either as an English auction, an ascending-bid auction with proxy bidding, or a sealed-bid second-price auction.
The Baseline Stage consisted of a set of auctions in which no buy prices were offered, while the Treatment Stage was made up of auctions in which buy prices were offered at various levels.