Online auction: The effects of transaction probability and listing price on a seller's decision-making behavior

Abstract

This study seeks to the answer the question of how an individual would trade off between listing fee (i.e., cost of listing an auction item) and transaction probability (i.e., the chance that a product will be sold). Applying the trade-off decision-making paradigm into the auction context, we examine a seller's choice of online auction outlet and subsequent starting price strategies when facing the trade-off between transaction probability and listing fee. Results from a set of laboratory experiments suggest that a seller would be willing to incur a high cost in exchange for a higher transaction prospect. Furthermore, if the expected transaction probability is high, a seller is more likely to set a high starting price despite incurring a high listing fee. The implications for theory and practice are discussed. © 2010 Institute of Information Management, University of St. Gallen.