Asking Price and Price Discounts: The Strategy of Selling an Asset Under Price Uncertainty

Tapan Biswas and Jolian McHardy

Theory and Decision, 2007, vol. 62, issue 3, 301 pages

Abstract: We consider fixed and asking price strategies in the context of selling an asset with Bernoullian updating of the seller’s subjective probability of sale at a given price. The determination of optimal fixed, asking and endogenous reservation prices is discussed under risk-neutrality and expected utility maximisation. With risk-neutrality, the optimal asking price exceeds the optimal fixed price when the expected gain is a strictly concave function. The seller’s choice between the fixed and the asking price strategies depends on several factors: the expected cost of haggling, price competition and the seller’s attitude towards risk. Copyright Springer Science+Business Media, LLC 2007

Keywords: fixed price; asking price; price discounts; reservation price; risk attitude (search for similar items in EconPapers)
Date: 2007
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Journal Article: ASKING PRICE AND PRICE DISCOUNTS: THE STRATEGY OF SELLING AN ASSET UNDER PRICE UNCERTAINTY (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:theord:v:62:y:2007:i:3:p:281-301

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DOI: 10.1007/s11238-007-9031-9

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