Strategic and Competitive Uses of Information & Digital Technologies (SCUIDT)

Paper Type

ERF

Paper Number

1481

Description

Many digital sales platforms list items for free but require a commission when a sale occurs, while others charge a listing fee based on listing placement or a fee based on the number of visits attracted by the listing. Since sellers might not know in advance which fee schedule to choose or how much to charge for the item for sale, they often experiment with different options until they find the one that brings the highest profit. This process of trial and error is free of losses under commission-based payment because the seller sets the item’s price and knows the item’s cost, however, if payment is based on the number of exposures or visits(clicks) the process can involve losses. We design a laboratory experiment using humans as subjects to investigate how the possibility of incurring losses affects sellers’ search for the maximum profit.

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Aug 9th, 12:00 AM

Pay-to-display or Pay-on-Commission: A Behavioral experiment

Many digital sales platforms list items for free but require a commission when a sale occurs, while others charge a listing fee based on listing placement or a fee based on the number of visits attracted by the listing. Since sellers might not know in advance which fee schedule to choose or how much to charge for the item for sale, they often experiment with different options until they find the one that brings the highest profit. This process of trial and error is free of losses under commission-based payment because the seller sets the item’s price and knows the item’s cost, however, if payment is based on the number of exposures or visits(clicks) the process can involve losses. We design a laboratory experiment using humans as subjects to investigate how the possibility of incurring losses affects sellers’ search for the maximum profit.