Competing with asking prices. Issue 2 (May 2017)

• Record Type: Journal Article
• Authors: Lester, Benjamin; Visschers, Ludo; Wolthoff, Ronald
• Is Part Of: Theoretical economics. Volume 12:Issue 2(2017)
• Page Start: 731
• Page End: 770
• Publication Date: 2017-05
• Subjects: Asking prices -- posted prices -- auctions -- competing mechanisms -- competitive search; C78 -- D44 -- D82 -- D83 -- R31; Economics -- Periodicals; 330.01
• DOI: 10.3982/TE1846
• Languages: English
• ISSNs: 1933-6837

Abstract

Abstract : In many markets, sellers advertise their good with an asking price . This is a price at which the seller will 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. We construct an environment with a few simple, realistic ingredients and demonstrate that, by using an asking price, sellers both maximize their revenue and implement the efficient outcome in equilibrium. We provide a complete characterization of this equilibrium and use it to explore the implications of this pricing mechanism for transaction prices and allocations.