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Auctions Beat Posted Prices in a Small Market

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Author Info
Benoît Julien
John Kennes
Ian King

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Abstract

In a model with two buyers and sellers we consider the choice of sales mechanism from three possibilities: posted prices, and auctions with and without reserve prices. With homogenous goods, sellers´expected revenues are highestwhen both sellers auction with reserve prices 33% higher than if posting prices and 100% higher than if auctioning without reserve prices. When sellers can choose their mechanism before choosing prices, both sellers auction with a reserve price in the dominant strategy equilibrium. With heterogenous goods, the equilibrium with posted prices is inefficient (MONTGOMERY [1991]) but the equilibria with both types of auctions are efficient.

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Publisher Info
Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 158 (2002)
Issue (Month): 4 (December)
Pages: 548-
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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200212)158:4_548:abppia_2.0.tx_2-c

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Related research
Keywords:

Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. John Kennes, 2004. "Competitive Auctions: Theory and Application," Discussion Papers 04-16, University of Copenhagen. Department of Economics. [Downloadable!]
    Other versions:
  2. Benoit Julien & John Kennes & Ian King, 2001. "Residual Wage Disparity and Coordination Unemployment," CAM Working Papers 2004-20, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics, revised Nov 2004. [Downloadable!]
    Other versions:
  3. John Kennes & Aaron Schiff, 2003. "The Value of a Reputation System," Industrial Organization 0301011, EconWPA. [Downloadable!]
  4. Melvyn G. Coles & Jan Eeckhout, 2000. "Heterogeneity as a Coordination Device," Economics Working Papers 510, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  5. John Kennes & Benoit Julien & Ian King, 2002. "The Mortensen Rule and Efficient Coordination Unemployment," Macroeconomics 0206001, EconWPA. [Downloadable!]
    Other versions:
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