Auctions with an asking price

Peyman Khezr and Flavio Menezes

No 539, Discussion Papers Series from University of Queensland, School of Economics

Abstract: This paper studies a sales mechanism, prevalent in housing markets, where the seller does not reveal or commit to a reserve price but instead publicly announces an asking price. We show that the seller sets an asking price such that, in equilibrium, buyers of certain types would accept it with positive probability. We also show that this sales mechanism, with an optimally chosen asking price set above the seller’s reservation value, does better than any standard auction with a reserve price equal to the seller’s reservation value. We then extend the analysis to the case where the asking price reveals information about the seller’s reservation value. We show that in this case there is a separating equilibrium with fully-revealing asking prices, which is revenue-equivalent to a standard auction with a reserve price set at the seller’s reservation value.

Keywords: asking price; auctions (search for similar items in EconPapers)
JEL-codes: D44 R3 (search for similar items in EconPapers)
Date: 2015-04-14
New Economics Papers: this item is included in nep-mic
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https://economics.uq.edu.au/files/46060/539.pdf (application/pdf)

Related works:
Journal Article: Auctions with an asking price (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:qld:uq2004:539

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