Competing with Asking Prices

Benjamin Lester, Ludo Visschers and Ronald Wolthoff

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

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. 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 implications of this pricing mechanism for transaction prices and allocations.

Keywords: asking prices; directed search; inspection costs; efficiency (search for similar items in EconPapers)
JEL-codes: C78 D44 D82 D83 L11 R31 R32 (search for similar items in EconPapers)
Pages: 47
Date: 2015-05, Revised 2015-05
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.econ.ed.ac.uk/papers/id257_esedps.pdf Revised version, May 2015 (application/pdf)
http://www.econ.ed.ac.uk/papers/id243_esedps.pdf First version, September 2014 (application/pdf)

Related works:
Journal Article: Competing with asking prices (2017)
Working Paper: Competing with Asking Prices (2016)
Working Paper: Competing with Asking Prices (2015)
Working Paper: Competing with Asking Prices (2014)
Working Paper: Competing with Asking Prices (2014)
Working Paper: Competing with Asking Prices (2014)
Working Paper: Competing with asking prices (2013)
Working Paper: Competing with Asking Prices (2013)
Working Paper: Competing with Asking Prices (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:257

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