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Auctions Beat Posted Prices in a Small Market

Benoit Julien (), John Kennes () and Ian King ()

Journal of Institutional and Theoretical Economics (JITE), 2002, vol. 158, issue 4, 548-562

Abstract: In a model with two buyers and sellers we consider the choice of sales mechanism from three possibilities: posted prices, and auctions with and without reserve prices. With homogenous goods, sellers´expected revenues are highestwhen both sellers auction with reserve prices 33% higher than if posting prices and 100% higher than if auctioning without reserve prices. When sellers can choose their mechanism before choosing prices, both sellers auction with a reserve price in the dominant strategy equilibrium. With heterogenous goods, the equilibrium with posted prices is inefficient (MONTGOMERY [1991]) but the equilibria with both types of auctions are efficient.

JEL-codes: D43 D44 D45 D83 (search for similar items in EconPapers)
Date: 2002
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