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Prices versus Auctions in Large Markets

Hanzhe Zhang ()

No 2019-13, Working Papers from Michigan State University, Department of Economics

Abstract: This paper studies the use of posted prices versus 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 from a reserve-price auction over posting a price reduces, but using posted prices would lead to sale and allocative inefficiencies.

Keywords: optimal sales mechanism; reserve-price auction; posted price (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2019-12-17
New Economics Papers: this item is included in nep-com, nep-des, nep-gth and nep-reg
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Citations: View citations in EconPapers (1)

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