Name
Abstract | ||
|---|---|---|
Reverse pricing is a market mechanism under which a consumer's bid for a product leads to a sale if the bid exceeds a hidden acceptance threshold the seller has set in advance. The seller faces two key decisions in designing such a mechanism. First, he must decide where in the process to collect the revenue---that is, whether to commit to a minimum markup above cost (and thus define the bid-acceptance threshold given cost) and whether to set a fee for the consumer's right to bid. Second, the seller must decide whether to facilitate or hinder consumer learning about the current bid-acceptance threshold. We analyze these decisions for a profit-maximizing small intermediary retailer selling to consumers who can also purchase the product in an outside posted-price market. The optimal revenue model is to charge a fee for the right to bid and then accept all bids above cost, rather than to set a positive minimum markup above cost. Avoiding minimum markups in favor of a bidding fee is more profitable because of increased efficiency arising from more entry by consumers and higher bids by the entrants. When consumers learn about the bid-acceptance threshold before they enter the market, efficiency increases further, and generating revenue through a bidding fee can compensate the seller for his loss of information rent when the competition from the outside posted-price firm is relatively weak. |
Year | DOI | Venue |
|---|---|---|
2010 | 10.1287/mksc.1100.0577 | Marketing Science |
Keywords | Field | DocType |
minimum markup,market mechanism,minimum markups,name-your-own-price,optimal reverse-pricing mechanisms,higher bid,hidden acceptance threshold,outside posted-price market,e-commerce.,analytical modeling,bidding fee,optimal revenue model,reverse pricing,bid-acceptance threshold,current bid-acceptance threshold,profitability,e commerce,market efficiency | Market mechanism,Revenue,Economics,Commit,Microeconomics,Business studies,Revenue model,Bidding,E-commerce,Marketing,Markup language | Journal |
Volume | Issue | ISSN |
29 | 6 | 0732-2399 |
Citations | PageRank | References |
6 | 0.79 | 7 |
Authors | ||
3 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| Martin Spann | 1 | 131 | 9.84 |
| Robert Zeithammer | 2 | 31 | 5.11 |
| Gerald Häubl | 3 | 106 | 9.47 |