Online auction: the effects of transaction probability and listing price on a seller’s decision-making behavior

Abstract

This study seeks to the answer the question of how an individual would trade off between listing fee (i.e., cost of listing an auction item) and transaction probability (i.e., the chance that a product will be sold). Applying the trade-off decision-making paradigm into the auction context, we examine a seller's choice of online auction outlet and subsequent starting price strategies when facing the trade-off between transaction probability and listing fee. Results from a set of laboratory experiments suggest that a seller would be willing to incur a high cost in exchange for a higher transaction prospect. Furthermore, if the expected transaction probability is high, a seller is more likely to set a high starting price despite incurring a high listing fee. The implications for theory and practice are discussed.

Co-authorship networks in electronic markets research

“…In turn, Kai Fischbach worked together with Heng Xu (H. Xu and Fischbach 2006), who published two papers in EM (e.g. Tan et al 2010;H. Xu and Gupta 2009).…”

Do borrowers make homogeneous decisions in online P2P lending market? An empirical study of PPDai in China

“…A seller in online auction market is also compelled to make trade-offs of listing fee and transaction probability, and need to make some strategic decisions, e.g., auction formats, starting price. However, although there are many auction studies have examined bidders' behaviors in response to online auction features, such as auction duration, starting price and reserve price, less attention has been paid to understand sellers' behaviors [21]. About the pricing formats, Reynolds and Wooder (2006) [22] demonstrate that auctions with buy price are preferable in that the seller can increase expected revenue, and find that a permanent buy price is superior to a temporary option.…”