Searching on a Deadline
AbstractWe analyze an equilibrium search model where the buyer seeks to purchase a good before a deadline. The buyer's reservation price rises continuously as the deadline approaches. A seller cannot observe a potential buyer's remaining time until deadline, and hence posts a price that weighs the probability of sale versus the profit once sold. The model has a unique equilibrium, which can take exactly one of two forms. In a late equilibrium, buyers initially forgo any purchases, only accepting some offers as the deadline draws near. In an early equilibrium, buyers are willing to accept some offers even as they enter the market. Equilibrium price dynamics are determined by the concentration of buyers near their deadline, as well as their urgency of completing the transaction before their deadline.
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Bibliographic InfoPaper provided by University of Miami, Department of Economics in its series Working Papers with number 2011-11.
Length: 37 pages
Date of creation: 2011
Date of revision:
Publication status: Forthcoming: Under Review
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Multiple treatments; Equilibrium search; deadline; reservation prices; price posting;
Find related papers by JEL classification:
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
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