Auction Beats Posted Prices in a Small Market

Benoit Julien, John Kennes and Ian King

No 154, Working Papers from Department of Economics, The University of Auckland

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 highest when 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.

Keywords: Coordination; Economics (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (8)

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Journal Article: Auctions Beat Posted Prices in a Small Market (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:auc:wpaper:154

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