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Auctions and Posted Prices in Directed Search Equilibrium

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Author Info

  • Julien Benoit

    ()
    (University of Miami)

  • Kennes John

    ()
    (University of Copenhagen)

  • King Ian Paul

    ()
    (University of Auckland)

Abstract

We compare equilibrium allocations in directed search models where prices are determined alternatively by posting and by competing auctions, with the following results. With finite numbers of players, sellers' expected payoffs are higher when all sellers auction than when all sellers post. This difference is largest in the 2-by-2 case, where payoffs to sellers are 1/3 higher if they auction. The difference in the payoffs decreases rapidly with market size and vanishes in the limit "large" economy. When sellers can choose whether to post prices or auction in the 2-by-2- case, all combinations (auction-auction, post-post, and auction-post) can occur in equilibrium if sellers choose mechanism and price simultaneously. However, if sellers choose mechanism before price then the dominant strategy equilibrium has both sellers auctioning.

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File URL: http://www.degruyter.com/view/j/bejm.2001.1.issue-1/bejm.2001.1.1.1024/bejm.2001.1.1.1024.xml?format=INT
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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 1 (2001)
Issue (Month): 1 (July)
Pages: 1-16

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Handle: RePEc:bpj:bejmac:v:topics.1:y:2001:i:1:n:1

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Web page: http://www.degruyter.com

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Cited by:
  1. John Kennes, 2004. "Competitive Auctions: Theory and Application," CAM Working Papers 2004-17, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  2. Pedro Gomis-Porqueras & Benoit Julien & Chengsi Wang, 2012. "Informative Advertising in Directed Search," Discussion Papers 2012-26, School of Economics, The University of New South Wales.
  3. John Kennes & Ian Paul King & Benoit Julien, 2002. "'Residual' Wage Disparity in Directed Search Equilibrium," Macroeconomics 0205003, EconWPA.
  4. Julien, Benoit & Kennes, John & King, Ian Paul, 2011. "Implementing the Mortensen rule in a frictional labor market," Journal of Macroeconomics, Elsevier, vol. 33(1), pages 80-91, March.

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