Abstract
Setting the buy price is perhaps one of the most challenging tasks faced by the Internet auction seller. A high buy price, if met, will fetch a generous profit, but the likelihood that the buy-out gets activated becomes miniscule; a low buy price, on the other hand may be attractive to most bidders, but may cause the seller to forfeit a possible higher profit. In this study, we shall interest ourselves to the framing of a permanent buy-out auction. Rather than searching for an optimum buy price, we explore the use of other seller adjustable variables of the auction to frame the buy-out. We observe that the buy price becomes attractive when the auction duration is long or when the gap between the current bid and the buy price is small; and sellers can expect higher profits by setting higher buy prices with a long auction duration. More interestingly, we manage to show that in a permanent buy-out setting, we can use the buy-out to frame a reserve price auction to achieve profit maximization.

Subject Descriptors:
K.4.4. Electronic Commerce
H.3.5. Online Information Services
J.4. Social and Behavioral Sciences

Keywords:
Auctions; Internet; Buy Price; Framing