Costly multi-unit search

Jose A. Carrasco and Rodrigo Harrison

European Economic Review, 2023, vol. 154, issue C

Abstract: We formulate and solve a costly multi-unit search problem for the optimal selling of a stock of goods. Our showcase application is an inventory liquidation problem with holding costs, such as warehousing, salaries or floor planning. A seller faces a stream of buyers periodically arriving with random capped demands. At each decision point, he decides how to price each unit and also whether to stop searching or not. We set this as a dynamic programming problem and solve it inductively by characterizing optimal search rules and reservation prices. Our inductive logic does not rely in the use of the first order conditions for optimal pricing and optimal search decisions.

Keywords: Search theory; Multi unit search; Inventory (search for similar items in EconPapers)
JEL-codes: C61 D80 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:154:y:2023:i:c:s0014292123000612

DOI: 10.1016/j.euroecorev.2023.104432

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