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Selling Goods of Unknown Quality: Forward versus Spot Auctions

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  • Isa E. Hafalir
  • Hadi Yektas

Abstract

We consider an environment where the sale can take place so early that both the seller and the potential buyers have the same uncertainty about the quality of the good. We present a simple model that allows the seller to put the good for sale before or after this uncertainty is resolved, , namely via forward auction or spot auction, respectively. We solve for the equilibrium of these two auctions and then compare the resulting revenues. We also consider the revenue implications of the insurance in forward auctions.

Suggested Citation

  • Isa E. Hafalir & Hadi Yektas, 2010. "Selling Goods of Unknown Quality: Forward versus Spot Auctions," Department of Economics - Working Papers Series 1091, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:1091
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    References listed on IDEAS

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    Cited by:

    1. Cadsby, C. Bram & Du, Ninghua & Wang, Ruqu & Zhang, Jun, 2016. "Goodwill Can Hurt: A theoretical and experimental investigation of return policies in auctions," Games and Economic Behavior, Elsevier, vol. 99(C), pages 224-238.
    2. Shi, Song & Zhang, Hong & Zhang, Jun, 2022. "The impact of a home purchase restrictions (HPR) policy on the distressed property market in Beijing," Journal of Housing Economics, Elsevier, vol. 58(PB).

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    More about this item

    Keywords

    Forward Trading; Forward Auctions; Spot Auctions;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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