Competing with Asking Prices

Benjamin Lester, Ludo Visschers and Ronald Wolthoff

Working Papers from University of Toronto, Department of Economics

Abstract: In many markets, sellers advertise their good with an asking price. This is a price at which the seller is willing to take his good off the market and trade immediately, though it is understood that a buyer can submit an offer below the asking price and that this offer may be accepted if the seller receives no better offers. Despite their prevalence in a variety of real world markets, asking prices have received little attention in the academic literature. We construct an environment with a few simple, realistic ingredients and demonstrate that using an asking price is optimal: it is the pricing mechanism that maximizes sellers' revenues and it implements the efficient outcome in equilibrium. We provide a complete characterization of this equilibrium and use it to explore the positive implications of this pricing mechanism for transaction prices and allocations.

Keywords: Asking Prices; Competing Mechanism Design; Auctions with Entry; Competitive Search (search for similar items in EconPapers)
JEL-codes: C78 D21 D44 D47 D82 D83 L11 R31 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2013-01-16
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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https://www.economics.utoronto.ca/public/workingPapers/tecipa-471.pdf Main Text (application/pdf)

Related works:
Journal Article: Competing with asking prices (2017)
Working Paper: Competing with Asking Prices (2016)
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