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Buyout prices in online auctions

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dc.contributor.advisor Jerémie Gallien. en_US Gupta, Shobhit en_US
dc.contributor.other Massachusetts Institute of Technology. Operations Research Center. en_US 2007-02-21T13:09:32Z 2007-02-21T13:09:32Z 2006 en_US 2006 en_US
dc.description Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, Operations Research Center, 2006. en_US
dc.description Includes bibliographical references (p. 149-154). en_US
dc.description.abstract Buyout options allow bidders to instantly purchase at a specified price an item listed for sale through an online auction. A temporary buyout option disappears once a regular bid above the reserve price is made, while a permanent option remains available until it is exercised or the auction ends. Buyout options are widely used in online auctions and have significant economic importance: nearly half of the auctions today are listed with a buyout price and the option is exercised in nearly one fourth of them. We formulate a game-theoretic model featuring time-sensitive bidders with independent private valuations and Poisson arrivals but endogenous bidding times in order to answer the following questions: How should buyout prices be set in order to maximize the seller's discounted revenue? What are the relative benefits of using each type of buyout option? While all existing buyout options we are aware of currently rely on a static buyout price (i.e. with a constant value), what is the potential benefit associated with using instead a dynamic buyout price that varies as the auction progresses? en_US
dc.description.abstract (cont.) For all buyout option types we exhibit a Nash equilibrium in bidder strategies, argue that this equilibrium constitutes a plausible outcome prediction, and study the problem of maximizing the corresponding seller revenue. In particular, the equilibrium strategy in all cases is such that a bidder exercises the buyout option provided it is still available and his valuation is above a time-dependent threshold. Our numerical experiments suggest that a seller may significantly increase his utility by introducing a buyout option when any of the participants are time-sensitive. Furthermore, while permanent buyout options yield higher predicted revenue than temporary options, they also provide additional incentives for late bidding and may therefore not be always more desirable. The numerical results also imply that the increase in seller's utility (over a fixed buyout price auction) enabled by a dynamic buyout price is small and does not seem to justify the corresponding increase in complexity. en_US
dc.description.statementofresponsibility by Shobhit Gupta. en_US
dc.format.extent 154 p. en_US
dc.language.iso eng en_US
dc.publisher Massachusetts Institute of Technology en_US
dc.rights M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission. en_US
dc.subject Operations Research Center. en_US
dc.title Buyout prices in online auctions en_US
dc.type Thesis en_US Ph.D. en_US
dc.contributor.department Massachusetts Institute of Technology. Operations Research Center. en_US
dc.identifier.oclc 76951768 en_US

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