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English auctions with a “buy-it-now” option are widely used in the Internet. This paper proposes a weakly dominant bidding strategy. It is optimal for bidders whose valuations are lower than the “buy-it-now” price to participate in the auction and bid their true valuations. Otherwise, bidders whose valuations are not lower than the “buy-it-now” price would make a choice between participating in the auction and pressing the “buy-it-now” button. It is optimal to bid the “buy-it-now” price if they decide to participate in the auction. We find that their decision on whether to participate in the auction or choose the “buy-it-now” significantly depends on the time remaining to the end of the auction.
Date of Conference: 29-31 Oct. 2010