Name-Your-Own-Price seller’s information revelation strategy with the presence of list-price channel

This study examines the Name-Your-Own-Price (NYOP) retailer’s information revelation strategy when competing with list-price channel and proposes an integrated economic framework focusing on the comparison of expected consumer surplus from bidding at NYOP auction and guaranteed consumers surplus from buying at a list price.

Abstract

This study examines the Name-Your-Own-Price (NYOP) retailer’s information revelation strategy when competing with list-price channel. We propose an integrated economic framework focusing on the comparison of expected consumer surplus from bidding at NYOP auction and guaranteed consumer surplus from buying at a list price. We then conduct an empirical study to examine the effects of seller-supplied price information on NYOP bidding outcome (especially on expected winning probability and the number of bidders). The results of our study strongly indicate the effects of seller-supplied information on expected winning probability (as well as the expected consumer surplus) in a NYOP auction. We also illustrate the strategic implications of seller-supplied price information via a revenue simulation for the NYOP seller. Our results suggest that NYOP seller may increase his expected revenue by (1) provide only the upper bound of its threshold price when list price is high (low expected consumer surplus from buying at list price); (2) provide only the lower bound of its threshold price when list price is low (high expected consumer surplus from buying at list price); (3) provide both the upper and lower bound of its threshold price when consumer surplus of buying at list price is unknown.