Buyer preferences for auction pricing rules in online outsourcing markets: fixed price vs. open price

Fixed-price and open-price are two mechanisms with different auction pricing rules that are popularly used in online outsourcing markets. This research empirically examines the determinants of buyers’ choices between the two mechanisms with secondary data from an online outsourcing market. We found that buyers tend to use open-price auctions with large size projects, while their propensity to use fixed-price auctions increases when they are more familiar with the project, have more trading experience in the market, or less trust in the service providers. Moreover, buyer experience has significant moderating effects on the impact of project size and buyer distrust. Our empirical results reveal a unique insight that incomplete information and information asymmetry, rather than the expected buyer surplus, are critical factors to buyers’ preferences on bid dimensionality.