The Dominance of Retail Stores

Alexandre Ziegler and Edward Lazear

No 9795, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Most items are sold to consumers by retail stores. Stores have two features that distinguish them from auctions. First, the price is posted and a consumer who values the good at more than the posted price is sold the good. Second, the sale takes place as soon as the consumer decides to buy. In contrast, auctions have prices that are determined ex post and the potential consumer must wait until the auction is held to buy the good. Consequently, auctions result in false trading', where buyers sometimes pass up other valuable opportunities while waiting for the auction to occur or instead make undesired duplicate purchases. Retail stores dominate auctions when the good is perishable and/or becomes obsolete quickly, when the market is thin, and when close substitutes for the good are plentiful. These predictions are consistent with a number of observed phenomena.

JEL-codes: D40 D44 (search for similar items in EconPapers)
Date: 2003-06
New Economics Papers: this item is included in nep-ind
Note: IO
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Citations: View citations in EconPapers (3)

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