The Impact of the Irrelevant: Temporary Buy-Options and Bidding Behavior in Auctions

The Impact of the Irrelevant: Temporary Buy-Options and Bidding Behavior in Auctions

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With a laboratory experiment, ssg1 inner barrel length we study the impact of buy-options and the corresponding buy-price on revenues and bidding behavior in (online) proxy-auctions with independent private valuations.We show that temporary buy-options may reduce revenues for two reasons: At low buy-prices, the application of the buy-option avoids revenue-enhancing bidding; at high buy-prices, bidders are reluctant to bid above the option price (even though the option is no longer available once an auction has started).The latter suggests a particular type of anchoring, where bidders use the buy-price to update their expectations about ashley stewart outlet the strengths of their opponents.