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The Dominance of Retail Stores

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  • Alexandre Ziegler
  • Edward P. Lazear

Abstract

Most items are sold to consumers by retail stores. Stores have two features that distinguish them from auctions. First, the price is posted and a consumer who values the good at more than the posted price is sold the good. Second, the sale takes place as soon as the consumer decides to buy. In contrast, auctions have prices that are determined ex post and the potential consumer must wait until the auction is held to buy the good. Consequently, auctions result in false trading', where buyers sometimes pass up other valuable opportunities while waiting for the auction to occur or instead make undesired duplicate purchases. Retail stores dominate auctions when the good is perishable and/or becomes obsolete quickly, when the market is thin, and when close substitutes for the good are plentiful. These predictions are consistent with a number of observed phenomena.

Suggested Citation

  • Alexandre Ziegler & Edward P. Lazear, 2003. "The Dominance of Retail Stores," NBER Working Papers 9795, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:9795
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    References listed on IDEAS

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    7. Wang, Ruqu, 1993. "Auctions versus Posted-Price Selling," American Economic Review, American Economic Association, vol. 83(4), pages 838-851, September.
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    Cited by:

    1. Caio Waisman, 2021. "Selling mechanisms for perishable goods: An empirical analysis of an online resale market for event tickets," Quantitative Marketing and Economics (QME), Springer, vol. 19(2), pages 127-178, June.
    2. Chen, Kong-Pin & Lai, Hung-pin & Yu, Ya-Ting, 2018. "The seller's listing strategy in online auctions: Evidence from eBay," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 107-144.
    3. Hammond, Robert G., 2013. "A structural model of competing sellers: Auctions and posted prices," European Economic Review, Elsevier, vol. 60(C), pages 52-68.

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    More about this item

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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