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Auctions versus Posted-Price Selling: The Case of Correlated Private Valuations

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  • Ruqu Wang

Abstract

Two popular selling methods are compared in a one-period correlated private-values model. The seller of an object has to decide whether to sell it by posting a fixed price or by an auction. Without auctioning costs, an auction (with a reserve price) is always preferable. With positive auctioning costs, the authors find that an auction is still preferable when the distribution of buyers' valuations is sufficiently dispersed or when the object value is sufficiently high. The relations between these and previous results are also discussed.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 31 (1998)
Issue (Month): 2 (May)
Pages: 395-410

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Handle: RePEc:cje:issued:v:31:y:1998:i:2:p:395-410

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Cited by:
  1. Paul Klemperer & Jeremy Bulow, 2009. "Why Do Sellers (Usually) Prefer Auctions?," Economics Series Working Papers 2009-W05, University of Oxford, Department of Economics.
  2. Christopher Boyer & B. Brorsen & Tong Zhang, 2014. "Common-value auction versus posted-price selling: an agent-based model approach," Journal of Economic Interaction and Coordination, Springer, vol. 9(1), pages 129-149, April.
  3. Jiang, Zhong-Zhong & Fang, Shu-Cherng & Fan, Zhi-Ping & Wang, Dingwei, 2013. "Selecting optimal selling format of a product in B2C online auctions with boundedly rational customers," European Journal of Operational Research, Elsevier, vol. 226(1), pages 139-153.
  4. Habib, Michel A. & Ziegler, Alexandre, 2007. "Why government bonds are sold by auction and corporate bonds by posted-price selling," Journal of Financial Intermediation, Elsevier, vol. 16(3), pages 343-367, July.
  5. Bulow, Jeremy I. & Klemperer, Paul D., 2007. "When Are Auctions Best?," Research Papers 1973, Stanford University, Graduate School of Business.
  6. Sun, Daewon & Li, Erick & Hayya, Jack C., 2010. "The optimal format to sell a product through the internet: Posted price, auction, and buy-price auction," International Journal of Production Economics, Elsevier, vol. 127(1), pages 147-157, September.
  7. Alexandre Ziegler & Edward P. Lazear, 2003. "The Dominance of Retail Stores," NBER Working Papers 9795, National Bureau of Economic Research, Inc.

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