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The analytics of search with posted prices


Author Info

  • Michael A. Arnold

    (Department of Economics, University of Delaware, Newark, DE 19716-2720, USA)

  • Steven A. Lippman

    (Anderson Graduate School of Management at UCLA, Los Angeles, CA 90095-1481, USA)


This paper investigates the characteristics of the optimal posted price in the standard sequential search paradigm. Much of the intuition gleaned from the extensive sequential search literature in which the seller adopts a reservation price does not carry over to the posted price setting. For example, an increase in buyer valuations can lead to a reduction in the optimal posted price. We do, however, provide sufficient conditions on the hazard rate function h which ensure that an increase in demand induces an increase in the optimal posted price. As exhibited herein, the analysis of the posted price model depends critically upon analytical properties of h. Amongst the issues treated are the elasticity of demand, finite horizon, sale of multiple units, and competitive equilibrium.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 17 (2001)
Issue (Month): 2 ()
Pages: 447-466

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Handle: RePEc:spr:joecth:v:17:y:2001:i:2:p:447-466

Note: Received: October 21, 1999; revised version: March 7, 2000
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Keywords: Sequential search; Posted price; Hazard rate.;

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Cited by:
  1. Gershkov, Alex & Moldovanu, Benny, 2007. "The Dynamic Assignment of Heterogenous Objects: A Mechanism Design Approach," CEPR Discussion Papers 6439, C.E.P.R. Discussion Papers.
  2. Steven Lippman & Sheldon Ross, 2008. "Variability is beneficial in marked stopping problems," Economic Theory, Springer, Springer, vol. 35(2), pages 333-342, May.


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