The fixed price offer mechanism in Trade Me online auctions

The fixed-price-offer (FPO) mechanism in Trade Me auctions allows sellers to make a take-it-or-leave-it offer at the conclusion of an unsuccessful auction. Weinvestigate the effects of the FPO option on strategies and outcomes in independent-value auctions. The FPO option induces some bidders with a value above the seller's reserve to wait for an FPO instead of bidding. Overall, the FPO option increases the probability of sale but reduces expected seller revenue compared with a standard auction. The impact of the FPO option is reduced when the number of bidders increases.