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Selling Goods of Unknown Quality: Forward versus Spot Auctions

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  • Hafalir, Isa E.
  • Yektas, Hadi

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

  • Hafalir, Isa E. & Yektas, Hadi, 2010. "Selling Goods of Unknown Quality: Forward versus Spot Auctions," MPRA Paper 19956, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:19956
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    References listed on IDEAS

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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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