Managing online sales with posted price and open-bid auctions

We study the profitability of selling consumer goods online using posted price and open ascending-bid uniform-price auction simultaneously. We develop a model of consumer behavior when faced with the choice between the two channels. The model is simulated in order to identify the best designs of the dual channel regime and compare its performance with that of the only posted price regime. We find that the best designs of dual channels with open-bid auctions differ from those of dual channels with sealed-bid auctions previously studied. In addition, when optimally designed, the dual channel regime outperforms the posted price regime.

► We model the simultaneous use of posted price and open-bid auctions.
► The seller sets the auction lot size, auction length, and the posted price, to maximize revenue.
► We use simulations to find upper and lower bounds for the dual-channel performance.
► We show that the dual channel is more profitable than the sole posted price channel.