Online Auctions and Multichannel Retailing

The Internet enables sellers to offer products through multiple channels simultaneously. In particular, many sellers utilize online auctions in parallel to an offline channel in which they offer the item for a fixed price. Using search theory, we develop an analytical model for studying sellers’ pricing decisions and auction outcomes in the context of such multichannel retailing. Our analytical model provides a framework for studying how characteristics of the demand in an offline retail sales channel impact the seller’s optimal reserve price in the auction channel, the probability that an auction ends in a sale, the probability that an item is sold through the auction channel, and the auction expected sale price. We then utilize data from eBay Motors auctions and examine empirically how the quality of a sellers’ retail location impacts the seller’s auctions outcomes. The results of our empirical analysis match the predictions of the analytical model. The online appendix is available at https://doi.org/10.1287/mnsc.2017.2732 . This paper was accepted by Chris Forman, information systems.