Abstract
Recently fixed pricing and auctions have been brought together in a new pricing format that offers
bidders the option of prematurely ending an auction at a fixed price. eBay calls this a “Buy-it-
Now” auction, uBid calls this “UBuy it” and Yahoo auctions refer to this as a “Buy Now”. The
growing popularity of auctions presents an interesting pricing decision for managers: whether to
sell at a fixed price, sell in a regular auction, or to sell through a buy-it-now auction. By posting
a fixed-price at an auction, the seller provides customers a convenient option to buy the item
directly without bidding. However, in doing so, the seller implicitly imposes a maximum bidding
level that could potentially limit revenue. This paper studies this new pricing format and answers
the following research questions: why is fixed price used at traditional auctions, will buy-it-now
increase the seller’s profit, how is an optimal price determined, and how is the buy-it-now decision
influenced by key factors such as the customer’s cost of participating in the auction, the seller’s
reserve price, and the number of potential customers. Our results show that buy-it-now auctions
can increase both customers’ utility and sellers’ profit under certain conditions. We empirically
test the predictions of our theoretical model using data collected from eBay.