Asking Price And Price Discounts: The Strategy Of Selling An Asset Under Price Uncertainty
Abstract(Originally published in Theory and Decision (2007) 62:281-301 (c) Springer) - We consider fixed and asking price strategies in the con- text of selling an asset with Bernoullian updating of the sellerâ€™s subjective probability of sale at a given price. The determination of optimal fixed, asking and endogenous reservation prices is discussed under risk-neutral- ity and expected utility maximisation. With risk-neutrality, the optimal asking price exceeds the optimal fixed price when the expected gain is a strictly concave function. The sellerâ€™s choice between the fixed and the asking price strategies depends on several factors: the expected cost of haggling, price competition and the sellerâ€™s attitude towards risk.
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Bibliographic InfoArticle provided by Rimini Centre for Economic Analysis in its journal Review of Economic Analysis.
Volume (Year): 4 (2012)
Issue (Month): 1 (June)
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fixed price; asking price; price discounts; reservation price; risk attitude.;
Other versions of this item:
- Tapan Biswas & Jolian Mchardy, 2007. "Asking Price and Price Discounts: The Strategy of Selling an Asset Under Price Uncertainty," Theory and Decision, Springer, vol. 62(3), pages 281-301, May.
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