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Competing with asking prices

Author

Listed:
  • Lester, Benjamin

    (Federal Reserve Bank of Philadelphia)

  • Visschers, Ludo

    (School of Economics, The University of Edinburgh; Department of Economics, Universidad Carlos III de Madrid; CESifo)

  • Wolthoff, Ronald

    (Department of Economics, University of Toronto)

Abstract

In many markets, sellers advertise their good with an asking price. This is a price at which the seller will 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. We construct an environment with a few simple, realistic ingredients and demonstrate that, by using an asking price, sellers both maximize their revenue and implement the efficient outcome in equilibrium. We provide a complete characterization of this equilibrium and use it to explore the implications of this pricing mechanism for transaction prices and allocations.

Suggested Citation

  • Lester, Benjamin & Visschers, Ludo & Wolthoff, Ronald, 2017. "Competing with asking prices," Theoretical Economics, Econometric Society, vol. 12(2), May.
  • Handle: RePEc:the:publsh:1846
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    References listed on IDEAS

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    More about this item

    Keywords

    Asking prices; posted prices; auctions; competing mechanisms; competitive search;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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