Buyout option has become an important feature that continues to drive seller success and
increase the trade volume in some Internet auction sites. For example, at eBay - the world’s
leading Internet auction site, the “Buy It Now” – a temporary buyout option, was the primary
source of the fixed price offering which contributed, in aggregate, approximately US$1.1
billion or 24% of total Gross Merchandise Sales during the forth quarter of 20022.
In light of the growing importance of Internet auction and the fact that Internet auction
differs from traditional auction in many aspects, a large amount of research has studied the
exchange mechanism in Internet auction. However, up to date there are very few papers
examining the buyout option. This paper seeks to fill this gap by conducting an exploratory
analysis to unravel the factors affecting bidders’ decision-making to exercise the buyout
option. A research model encompassing bidders’ choice of exercising buyout option and the
potential determinants was developed. Auction data from eBay were collected and analyzed.
Findings from this study have both academic and practical implications. They represent
initial steps toward building a generalized theory of Internet auction. Understanding the
bidding behavior of auction participants with respect to buyout option would help sellers to
not only increase the possibility to sell off their items, but also get reasonably good prices
from buyers. Similarly, our findings would help online auction houses to provide better
advice and more useful tools to their clients, to improve their revenues from the increased
“inventory turnover”, and to achieve a better reputation as an efficient Internet auction site.