ASKING PRICE AND PRICE DISCOUNTS: THE STRATEGY OF SELLING AN ASSET UNDER PRICE UNCERTAINTY

Tapan Biswas and Jolian McHardy

Review of Economic Analysis, 2012, vol. 4, issue 1, 17-37

Abstract: (Originally published in Theory and Decision (2007) 62:281-301 (c) Springer) - We consider fixed and asking price strategies in the con- text 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-neutral- ity 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.

Keywords: fixed price; asking price; price discounts; reservation price; risk attitude. (search for similar items in EconPapers)
Date: 2012
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Related works:
Journal Article: Asking Price and Price Discounts: The Strategy of Selling an Asset Under Price Uncertainty (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ren:journl:v:4:y:2012:i:1:p:17-37

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