Does the seller of a house facing a large number of buyers always decrease its price when its first offer is rejected?

Jean Gabszewicz, Tanguy van Ypersele and Skerdilajda Zanaj

No 2011049, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper identifies the optimal two-period price sequence in the attempt for selling a good, with take-it-or-leave-it offers, when the seller faces ambiguity about the buyers' willingness to pay. If the first round fails, the seller updates its beliefs on the state of the market in accordance with Bayes rule and quotes a second and final price. We show that the optimal sequence of prices can be increasing. Furthermore, we describe the optimal sequence of prices with a myopic seller who does not update his beliefs in the second period. In this case, the optimal price sequence is always decreasing.

Keywords: ambiguity; sequential bilateral trade; bayesian vs myopic behaviour (search for similar items in EconPapers)
JEL-codes: D8 D82 D89 (search for similar items in EconPapers)
Date: 2011-10-28
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Working Paper: Does the seller of a house facing a large number of buyers always decrease its price when its first offer is rejected? (2011)
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