Prices versus auctions in large markets

Hanzhe Zhang ()

Economic Theory, 2021, vol. 72, issue 4, No 8, 1297-1337

Abstract: Abstract This paper studies the use of posted prices and auctions in a large dynamic market with many short-lived sellers and long-lived buyers. Although a reserve-price auction maximizes the expected revenue, the optimal revenue decreases when the market becomes more buyer-friendly; namely, when buyers survive longer, face fewer competitors, and become more patient. As the market becomes more buyer-friendly, the revenue advantage of a reserve-price auction over posting a price also decreases, but using posted prices would lead to sale and allocative inefficiencies.

Keywords: Optimal mechanism; Reserve price; Auction; Posted price (search for similar items in EconPapers)
JEL-codes: C73 C78 D44 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s00199-020-01313-w

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