Competing with asking prices

Arbeitspapier

In many markets, sellers advertise their good with an asking price. This is a price at which the seller is willing to take his good off the market and trade immediately, though it is understood that a buyer can submit an offer below the asking price and that this offer may be accepted if the seller receives no better offers. Despite their prevalence in a variety of real world markets, asking prices have received little attention in the academic literature. We construct an environment with a few simple, realistic ingredients and demonstrate that using an asking price is optimal: it is the pricing mechanism that maximizes sellers' revenues and it implements the efficient outcome in equilibrium. We provide a complete characterization of this equilibrium and use it to explore the positive implications of this pricing mechanism for transaction prices and allocations.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 7163

Classification and Topics

• Classification: Wirtschaft ; Bargaining Theory; Matching Theory ; Firm Behavior: Theory ; Auctions ; Market Design ; Asymmetric and Private Information; Mechanism Design ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Housing Supply and Markets
• Subject: asking prices ; competing mechanism design ; auctions with entry ; competitive search

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lester, Benjamin ; Visschers, Ludo ; Wolthoff, Ronald
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/69474