Factors affecting price setting in online auctions

This article studies the effects of product class and seller reputation on price‐setting in online auctions. Sellers may offer price information to potential bidders through buy‐now prices (BNPs) and starting prices (SPs). In two experiments, the authors show that for products with values that are difficult to assess, such price information affects bidders’ perception and willingness to pay. In addition, the authors model sellers’ decision making in setting the SP and BNP as a two‐stage process, using data collected from eBay auctions. Results show that reputable sellers are more likely to set a BNP for their high‐end products.