Temporary and Permanent Buyout Prices in Online Auctions

Gallien, Jérémie; Gupta, Shobhit

doi:10.1287/mnsc.1060.0650

Cited by 64 publications

(28 citation statements)

References 10 publications

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“…MS-0001-1922.65 7 display formats (display all vs. display one) on the seller's expected profits. There are also papers that consider strategic consumers in dynamic auction settings (see, e.g., Caldentey andVulcano, 2004, andGallien andGupta, 2005). All the above papers only study the interaction between strategic consumers and a single seller, while our paper also considers the vertical relationship between manufacturers and retailers.…”

Section: Literature Reviewmentioning

confidence: 99%

Strategic Customer Behavior, Commitment, and Supply Chain Performance

2008

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This paper studies the impact of strategic customer behavior on supply chain performance. We start with a newsvendor seller facing forward-looking customers. The seller initially charges a regular price but may salvage the leftover inventory at a lower salvage price after random demand is realized. Customers anticipate future sales and choose purchase timing to maximize their expected surplus. We characterize the rational expectations equilibrium, where we find that the seller's stocking level is lower than that in the classic model without strategic customers. We show that the seller's profit can be improved by promising either that quantities available will be limited (quantity commitment) or that prices will be kept high (price commitment). In most cases, both forms of commitment are not credible in a centralized supply chain with a single seller. However, decentralized supply chains can use contractual arrangements as indirect commitment devices to attain the desired outcomes with commitment. Decentralization has generally been associated with coordination problems, but we present the contrasting view that disparate interests within a supply chain can actually improve overall supply chain performance. In particular, with strategic customer behavior, we find that (i) a decentralized supply chain with a wholesale price contract may perform strictly better than a centralized supply chain; (ii) contracts widely studied in the supply chain coordination literature (e.g., markdown money, sales rebates, and buyback contracts) can serve as a commitment device as well as an incentive-coordinating device; and (iii) some of the above contracts cannot allocate profits arbitrarily between supply chain members because of strategic customer behavior. This paper studies the impact of strategic customer behavior on supply chain performance. We start with a newsvendor seller facing forward-looking customers. The seller initially charges a regular price but may salvage the leftover inventory at a lower salvage price after random demand is realized. Customers anticipate future sales and choose purchase timing to maximize their expected surplus. We characterize the rational expectations (RE) equilibrium, where we find that the seller's stocking level is lower than that in the classic model without strategic customers. We show that the seller's profit can be improved by promising that: either quantities available will be limited (quantity commitment) or prices will be kept high (price commitment).In most cases, both forms of commitment are not credible in a centralized supply chain with a single seller.However, decentralized supply chains can use contractual arrangements as indirect commitment devices to attain the desired outcomes with commitment. While decentralization has generally been associated with coordination problems, we present the contrasting view that disparate interests within a supply chain can actually improve overall supply chain performance. In particular, with strategic customer behavior, we find that: (...

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Section: Literature Reviewmentioning

confidence: 99%

Strategic Customer Behavior, Commitment, and Supply Chain Performance

2008

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“…Another paper considering both temporary and permanent BiN prices is Gallien and Gupta (2007). They explain the use of both types of BiN prices by impatience, which makes their work closely related to the work of Mathews (2004).…”

Section: Buy It Nowmentioning

confidence: 99%

eBay in the Economic Literature: Analysis of an Auction Marketplace

Hasker

Sickles

2010

Rev Ind Organ

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This survey brings together theoretical and empirical questions that have been addressed in the economic literature on eBay, focusing on understanding the behavior of buyers and sellers. We discuss several puzzles of bidder behavior and the explanations that have been put forward by the literature for each. We then discuss structural estimates of bidder behavior and measuring the consumer surplus derived from eBay. We then try to understand why there are so many selling formats being used simultaneously, and then focus on the critical decision variables for a seller in an eBay English auction. Finally we analyze how trustworthy eBay sellers are on average, and whether the feedback system provides strong incentives for good behavior. © 2010 Springer Science+Business Media, LLC

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“…In addition, the growing literature on the auctions with the buyout option ("buy it now" option) could be considered as a combined bargaining-auction model, where the buyout price acts as a take-it-or-leave-it offer before the bidders participate in the auction. It has been noted that when the bidders exhibit impatience over time, this option can increase the auctioneer's profit (Mathews [29], Budish and Takeyama [7], Hidvégi et al [23], Caldentey and Vulcano [10], Gallien and Gupta [22]). …”

Section: Literature Reviewmentioning

confidence: 99%

“…Each of these three methods have been studied in the operations management literature, e.g., Federgruen and Heching [20], Chen [13], Chen et al [14], and Nagarajan and Bassok [33], but we note that many transactions in business practice cannot simply be categorized as pricing, auction or bargaining, as they may have the characteristics of multiple methods. There have been a number of papers that combines features of pricing and auction, e.g., Caldentey and Vulcano [10] and Gallien and Gupta [22]. In this paper, we consider a procurement method that sequentially combine auction and bargaining, where the outcome of the auction is not final and is subject to further negotiation.…”

Section: Introductionmentioning

confidence: 99%

A sequential auction‐bargaining procurement model

Huh

Park

2009

Naval Research Logistics

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One of the most important decisions that a firm faces in managing its supply chain is a procurement decision: selecting suitable suppliers among many potential competing sellers and reducing the purchase cost. While both auction and bargaining have been extensively studied in the literature, the research that combines both auction and bargaining is limited. In this paper, we consider a combined auction-bargaining model in a setting where a single buyer procures an indivisible good from one of many competing sellers. The procurement model that we analyze is a sequential model consisting of the auction phase followed by the bargaining phase. In the auction phase, the sellers submit bids, and the seller with the lowest bid is selected as the winning bidder. In the bargaining phase, the buyer audits the cost of the winning seller and then negotiates with him to determine the final price. For this auction-bargaining model, we find a symmetric bidding strategy equilibrium for the sellers in a closed form, which is simple to understand and closely related to the classical results in the auction and bargaining literature. We also show that the auction-bargaining model generates at least as much profit to the buyer as the standard auction or sequential bargaining model.

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Temporary and Permanent Buyout Prices in Online Auctions

Cited by 64 publications

References 10 publications

Strategic Customer Behavior, Commitment, and Supply Chain Performance

Strategic Customer Behavior, Commitment, and Supply Chain Performance

eBay in the Economic Literature: Analysis of an Auction Marketplace

A sequential auction‐bargaining procurement model

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