The optimal sequence of prices and auctions

Hanzhe Zhang ()

European Economic Review, 2021, vol. 133, issue C

Abstract: To sell a good before a deadline, a monopolist chooses between posting a price and running a costly reserve-price auction each period. Buyers with independent private values arrive over time. For a wide range of auction costs, the profit-maximizing mechanism sequence is to post prices first and then to run auctions. The optimality of the prices-then-auctions mechanism sequence provides a new justification for the hybrid sales mechanism of allowing the “Buy It Now” option before a standard auction on eBay.

Keywords: Posted price; Reserve price auction; eBay; Buy it now (search for similar items in EconPapers)
JEL-codes: D44 D47 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:133:y:2021:i:c:s0014292121000349

DOI: 10.1016/j.euroecorev.2021.103681

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