Probably more what they think the item is worth. Which may not be what it is actually worth or what the market is willing to pay at that time. A Reserve or Starting Price on an auction is more what you are describing.
As MaO (which I have still to be convinced of its worth) is optional, the seller has the choice whether to hold out for their BIN price or to sense the mood of the market and maybe adjust their expectations.
As I understand things - and so it should. If an item is listed with auction and buy it now - when the item is bid on, the buy it now automatically disappears. What fun would it be for the buyer if they opt for the make an offer and then someone else comes along and bids on it? If you only have one if that particular item, how do you decide who to sell it to?
You would run into the problem of legal issues if a seller has something listed as being sold at auction and then entertains offers outside of the bidding process. I suppose it would be possible to have it set up to automatically remove the auction type of selling method, just like the BIN, if someone makes an offer. Provided, of course, there are no bids placed prior to the offer being received. However, just like the case of the BIN, there could be a legal problem if the MaO option were still available once a bid was placed. The bidder could very well have a legitimate claim that the seller was not acting in good faith.
Personally, I don't see why someone would want to use the MaO option in conjunction with an auction style listing. Of course, using it with a fixed price list is merely giving an asking price and including "or best offer."
Mel! You are probably correct in thinking that the BIN is more like what the seller thinks it is worth. Actually, I usually set a BIN in connection with an auction to what I think a good high street shop's retail price would be for the item. A reserve, or in some cases the starting bid, would be the least I'd be willing to take for it. In a haggle situation I would expect the seller to set their "Buy Now" (Asking Price) high enough to have room for negotiations. Seller asks high...Buyer offers low...Haggle...Haggle...Haggle...They meet somewhere in the middle...both leave happy.
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