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The optimal sequence of prices and auctions

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  • Zhang, Hanzhe

Abstract

To sell a good before a deadline, a monopolist chooses between posting a price and running a costly reserve-price auction each period. Buyers with independent private values arrive over time. For a wide range of auction costs, the profit-maximizing mechanism sequence is to post prices first and then to run auctions. The optimality of the prices-then-auctions mechanism sequence provides a new justification for the hybrid sales mechanism of allowing the “Buy It Now” option before a standard auction on eBay.

Suggested Citation

  • Zhang, Hanzhe, 2021. "The optimal sequence of prices and auctions," European Economic Review, Elsevier, vol. 133(C).
    • Handle: RePEc:eee:eecrev:v:133:y:2021:i:c:s0014292121000349
    DOI: 10.1016/j.euroecorev.2021.103681
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    References listed on IDEAS

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    Cited by:

    1. Alexander Maslov, 2023. "Auctions versus posted prices in the revenue management of limited inventory," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1476-1490, April.

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    More about this item

    Keywords

    Posted price; Reserve price auction; eBay; Buy it now;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design

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