Optimal Reserve Prices in Name-Your-Own-Price Auctions with Bidding and Channel Options

Abstract

Few papers have explored the optimal reserve prices in the name-your-own-price (NYOP) channel with bidding options in a multiple channel environment. In this paper, we investigate a double-bid business model in which the consumers can bid twice in the NYOP channel, and compare it with the single-bid case. We also study the impact of adding a retailer-own list-price channel on the optimal reserve prices. This paper focuses on achieving some basic understanding on the potential gain of adding a second bid option to a single-bid system and on the potential benefits of adding a list-price channel by the NYOP retailer. We show that a double-bid scenario can outperform a single-bid scenario in both single-channel and dual-channel situations. The optimal reserve price in the double-bid scenario is no less than that in the single-bid case. Furthermore, the addition of a retailer-own list-price channel could push up the reserve prices in both single-bid and double-bid scenarios.