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Auctions Beat Posted Prices in a Small Market

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  • Benoît Julien
  • John Kennes
  • Ian King

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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Bibliographic 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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Cited by:
  1. Melvyn G. Coles & Jan Eeckhout, 2000. "Heterogeneity as a coordination device," Economics Working Papers 510, Department of Economics and Business, Universitat Pompeu Fabra.
  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. John Kennes, 2004. "Competitive Auctions: Theory and Application," CAM Working Papers 2004-17, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  4. Halko, Marja-Liisa & Kultti, Klaus & Niinimaki, Juha-Pekka, 2007. "Evolutionary stability of trading rules in an urn-ball matching model," Research in Economics, Elsevier, vol. 61(1), pages 11-15, March.
  5. 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.
  6. Julien, Benoit & Kennes, John & King, Ian, 2006. "The Mortensen rule and efficient coordination unemployment," Economics Letters, Elsevier, vol. 90(2), pages 149-155, February.
  7. Kyungmin Kim (University of Iowa) and Philipp Kircher (University of Edinburgh), 2013. "Who is the fairest of them all? The independent effect of attractive features and self-perceived attractiveness on cooperation among women," ESE Discussion Papers 235, Edinburgh School of Economics, University of Edinburgh.
  8. John Kennes & Aaron Schiff, 2003. "The Value of a Reputation System," Industrial Organization 0301011, EconWPA.

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