Auctions With Commission And Buyout Price

With the popularity of the Internet and the rapid development of e-commerce, online auction has become popular, and along with the emergence of tons of large-scale, professional auction website. As an intermediary, these websites provide an online platform for buyers and sellers, and usually these services are not provided for free, the website always charge a commission to the buyer or the seller according to a fixed price or a certain percentage of auction price. Currently, the main websites are using the mechanism of auction with buyout price, and this mechanism has occupied a large proportion of the online auction' gross commercial value. And the epidemic of auction with buyout price in reality is in stark contrast to the relative lack of theoretical research, which makes valueable for study both in theoretical and practical.The puzzle for theoretical research is that the classical auction makes greater revenues than the buyout price mechanism for the seller. Thus, why should the seller provides bidders with an option to end the auction early by accepting a transaction at a posted price? The popularity of auction with buyout price means that the assumptions in classical model are not always hold. This article considers the buyout price as a partial of information rents that the seller transferred to bidders for some sort of compensation. So the existing literature can be seen as the seller transfers a partial of information rents for the compensation from risk, time, transaction cost and reference point. Based on the background of the development of online auction, this paper attempts to explore a new perspective to the cause of buyout price and its' influence of results. We will expand the line of sight to the auction website as an intermediary, which is ignored by existing literature. We study the equilibrium of bidders, the seller and the intermediary, and compare the expected revenues between our mechanism and the classical mechanism, different types of new mechanisms. This model provides a insight view and analytical framework of bidders' and the seller's choices of the auction mechanism. In this regard, this paper carried out research in the following areas.First, based on the symmetric independent private value assumption, using backward induction game theory, the paper derives the bidders' equilibrium bidding strategy, the seller's optimal reserve price and the intermediary's optimal commission level. It is shown that if the commission is introduced, then the buyout price of the seller is lower than the price accepted by the highest bidder, as a result of this choice, the buyout option is never exercised, thus this may increases the seller's expected revenue. Given a level of commission, the optimal reserve price is higher than the reserve price in auction without commission. Given a reserve price, the optimal commission is not higher than the rate in auction without buyout price. That is, besides the participants' risk aversion, impatience, transaction cost and reference point, the existence of commission may encourage the seller adopt the auctions with buyout price, and the existence of commission is the cause of buyout price. Then we generalized the model, consider the model with commission exists in bidding stage and buyout price stage. It is shown that setting the buyout price can increase auction revenue when the commission charged in buyout price stage than the commission charged in bidding stage. Otherwise, the seller does not set a buyout price. In addition, fixed buyout price are generalize in the analytical framework of buyout price, this can be understood that the temporary buyout price is set too low so that the bidder do not select the temporary buyout price in bidding stage.Second, in the monopoly market of auction intermediary, this paper studies the decision of optimal commission level in auctions with buyout price. It is shown that the "threshold effect" that determined by commission and reserve price may impede the level set higher, so that the optimal commission levels can be determined. Furthermore, since the model has negative substitution effects of mechanism, the optimal commission level of this model is not higher than that of classic model with commission. Finally, through numerical analysis method, the conclusion was verified.Third, with the widespread use of commission by quotas in reality, such as registration fees and display fees charged by the auction website(Wang, 2011), real estate agents fees, a auction with buyout price model is constructed to study the optimal fixed commission charged by the auction websites. It is shown that, in the fixed commission model, there is no "threshold effect" that determined by commission but only by the reserve price levels may impede the level set higher, so that the optimal fixed commission levels can be determined.Fourth, by constructing a auction model considering the organizing cost, we analysis the reasons for the exsitence of the auction intermediary. In the framework of a three-stage game, we determined the optimal commission rate of auction intermediary, the option of introducing the auction intermediary and the bidders' equilibrium bidding stategies. It is shown that the optimal commission rate setted by auction intermediary depends on the expected distribution function of the seller's organizing cost and and the second highest bidder private value statistics, and the second highest private value statistics in turn depends on the private value distribution function. Further, the high organizing cost induces the seller more likely to introduce the auction intermediary. Otherwise, the auction intermediary is not introduced.With the development of e-commerce and refinement of division in modern market, the online auction mechanism with buyout price and commission rate in consideration the auction websites will get more enough concern and research.