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Asking Prices as Commitment Devices

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Author Info

  • Chen, Y.
  • Rosenthal, R.W.

Abstract

This paper explores the implications of the hypothesis that an asking price is a ceiling to which a seller commits in order to provide incentives for potential buyers to incur search costs. Having attracted such a potential buyer, the seller must also determine how low to set the floor price, below which it is preferable to wait for another customer. This decision is affected by expectations about the characteristics of future buyers, which are, in turn, affected by the asking price. All of this is embedded in models of monopoly and of duopolistic competition. Copyright 1996 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Paper provided by Boston University - Industry Studies Programme in its series Papers with number 42.

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Length: 33 pages
Date of creation: 1993
Date of revision:
Handle: RePEc:fth:bostin:42

Contact details of provider:
Postal: Boston University, Industry Studies Program; Department of Economics, 270 Bay Road, Boston, Massachusetts 02215.
Phone: 617-353-4389
Fax: 617-353-444
Email:
Web page: http://www.bu.edu/econ/isp/
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Related research

Keywords: prices ; contracts;

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Cited by:
  1. Richard Arnott & Paul Anglin, 1995. "Are Brokers' Commission Rates on Home Sales Too High? A Conceptual Analysis," Boston College Working Papers in Economics 302., Boston College Department of Economics.
  2. Albrecht, James & Gautier, Pieter A. & Vroman, Susan, 2010. "Directed Search in the Housing Market," CEPR Discussion Papers 7639, C.E.P.R. Discussion Papers.
  3. Wang, Ruqu, 2000. "Bidding and renegotiation in procurement auctions," European Economic Review, Elsevier, vol. 44(8), pages 1577-1597, August.
  4. Benjamin Lester & Ludo Visschers & Ronald Wolthoff, 2013. "Competing with asking prices," Working Papers 13-07, Federal Reserve Bank of Philadelphia.
  5. Inami, Yusuke, 2011. "The buy price in auctions with discrete type distributions," Mathematical Social Sciences, Elsevier, vol. 61(1), pages 1-11, January.
  6. David Gill & John Thanassoulis, 2013. "Competition in Posted Prices With Bargaining," Economics Series Working Papers 639, University of Oxford, Department of Economics.
  7. Antonio Merlo & François Ortalo-Magné, 2002. "Bargaining over Residential Real Estate: Evidence from England (Third Version)," PIER Working Paper Archive 04-020, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Sep 2002.
  8. Antonio M. Merlo & François Ortalo-Magné, 2002. "Bargaining over Residential Real Estate: Evidence from England," CESifo Working Paper Series 778, CESifo Group Munich.
  9. Elliot Anenberg, 2012. "Information frictions and housing market dynamics," Finance and Economics Discussion Series 2012-48, Board of Governors of the Federal Reserve System (U.S.).
  10. Paul E. Carrillo, 2005. "Assessing the Value of On-line Information Using a Two-sided Equilibrium Search Model in the Real Estate Market," Computing in Economics and Finance 2005 307, Society for Computational Economics.
  11. Michael Sandfort & Hideo Konishi, 2000. "Expanding Demand through Price Advertisement," Boston College Working Papers in Economics 453, Boston College Department of Economics, revised 21 Jun 2001.
  12. Gill, David & Thanassoulis, John, 2009. "The impact of bargaining on markets with price takers: Too many bargainers spoil the broth," European Economic Review, Elsevier, vol. 53(6), pages 658-674, August.
  13. Anenberg, Elliot, 2011. "Loss aversion, equity constraints and seller behavior in the real estate market," Regional Science and Urban Economics, Elsevier, vol. 41(1), pages 67-76, January.
  14. Selcuk, Cemil, 2012. "Motivated Sellers & Predatory Buyers," MPRA Paper 36226, University Library of Munich, Germany.
  15. Charles Ka Yui Leung & Youngman Chun Fai Leong & Ida Yin Sze Chan, 2002. "TOM: Why Isn’t Price Enough?," International Real Estate Review, Asian Real Estate Society, vol. 5(1), pages 91-115.

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