Auctions, Bargaining or Posted Prices? An Empirical Study on Online Pricing Mechanism Choice

Han Yong, Chen Kongpin

Foreign Economics & Management Vol. 38, Issue 11, pp. 29 - 44 (2016)  DOI:10.16538/j.cnki.fem.2016.11.003

Abstract

With the rapid development of Internet economy, online pricing practices improve continuously. This paper theoretically investigates and empirically tests the main factors affecting sellers' choice among auctions, posted prices and bargaining mechanisms and the effects. Based on second-hand cars' transaction data on eBay, this paper builds structural equation and uses maximum likelihood estimation to make an empirical study, and finds that the sellers' patience and transaction scales have significant effects on sellers' pricing mechanism choice; there is no obvious difference in transaction prices among these three pricing mechanisms, but compared with posted prices, auctions and bargaining significantly increase successful transaction probability, thereby bringing higher expected revenues to sellers. Under the background of rapid development of electronic commerce and online transactions in China, it is necessary to further improve and perfect the online pricing mechanism from the perspective of improving the efficiency of online transactions.

Keywords

online transaction platform; auction; bargaining; posted price; sellers'revenue