Abstract: An online English auction process is studied with permanent buyout option. Online auction breaks the limitation of time and space of traditional auctions. The buyout option allows a bidder to obtain the auction item immediately by accepting the buyout price, which overcomes the problem of high time cost and makes it widely used in e-commerce platform. Decision-making approaches of online English auction are proposed based on focus point, which emphasize the fact that it is the highest biding price that determines whether the bidder can win the auction. The focus is selected by comprehensively considering the relative possibility of obtaining the auction item and the income. Participants make decisions according to the selected focus point, and different types of focus point are used to directly reflect participants’ decision preferences. Two types of focus point are considered. The active focus point is a state with higher relative possibility degree and higher satisfaction level. It is selected by an optimistic participant. The passive focus point is a state with higher relative possibility degree and lower satisfaction level. It is selected by a pessimistic participant. The optimal strategies of bidders with different risk preferences and the range of the seller’s buyout price under the English auction are given. This approach based on the focus point can explain the jump bidding strategies in an auction process. Setting an appropriate buyout price provides a way to avoid the problem such as “winner’s curse” and bidders’ offers are usually concentrated at the end segment. The influence of the number of participants, valuation and other factors on the focus point is analyzed. It shows that the bidder with passive focus point is more honest and more likely to accept the buyout price than the bidder with active focus point. It provides decision support for online auction participants and management enlightenment for the platform by considering the bidding example of Yahoo.

Key words: online auction; permanent buyout price; focus point; English auction