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Auctions Versus Posted-Price Selling

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Author Info
Ruqu Wang

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Abstract

Two most popular selling methods -- posted-price selling and auctions -- are compared in this paper. We confirm the common belief that auctions are most often used when the distribution of the object's value is widely dispersed. The choice of selling methods usually depends on the costs of displaying, storing and auctioning. In the absence of auctioning costs, auctioning at every instant is optimal. The 'dispersion' of a distribution is then formally defined and developed. Using the definition of dispersion, we prove that auctions becomes preferable when a potential buyer's valuation becomes more dispersed. Finally, the optimization of a social planner is studied and we find that the monopoly seller's price can be higher or lower than that of the social optimum.

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Publisher Info
Paper provided by Queen's University, Department of Economics in its series Working Papers with number 812.

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Length: 31 pages
Date of creation: 1991
Date of revision:
Handle: RePEc:qed:wpaper:812

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Keywords: prices enterprises economic models

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  1. Schmitz, Patrick W., 2003. "On Second Price Auctions and Imperfect Competition," CEPR Discussion Papers 3774, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Walter Beckert, 2004. "Dynamic Monopolies with Stochastic Demand," Birkbeck Working Papers in Economics and Finance 0404, Birkbeck, School of Economics, Mathematics & Statistics. [Downloadable!]
  3. Jeremy I. Bulow & Paul D. Klemperer, 2007. "When are Auctions Best?," NBER Working Papers 13268, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Jose Canals-Cerda, 2005. "Congestion Pricing in an Internet Market," Working Papers 05-10, NET Institute, revised Sep 2005. [Downloadable!]
  5. A. Masters & A. Muthoo, 2003. "Ex Ante Price Commitment with Renegotiation in a Dynamic Market," Economics Discussion Papers 555, University of Essex, Department of Economics. [Downloadable!]
  6. Kultti, K., 1997. "Price formation by bargaining and posted prices," Discussion Paper 56, Tilburg University, Center for Economic Research. [Downloadable!]
  7. Nicholas Shunda, 2007. "Auctions with a Buy Price: The Case of Reference-Dependent Preferences," Working papers 2007-42, University of Connecticut, Department of Economics. [Downloadable!]
  8. Young Han Lee & Ulrike Malmendier, 2007. "The Bidder's Curse," NBER Working Papers 13699, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Adrian Masters & Abhinay Muthoo, 2000. "Ex-Ante Price Commitment with Renegotiation in a Dynamic Market Equilibrium," ILR working papers 056, Institute for Labour Research. [Downloadable!]
    Other versions:
  10. Benoit Julien & John Kennes & Ian King, 2001. "Residual Wage Disparity and Coordination Unemployment," CAM Working Papers 2004-20, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics, revised Nov 2004. [Downloadable!]
    Other versions:
  11. Alexandre ZIEGLER, 2002. "When are Retail Stores Preferable to Auctions ?," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 02.03, Université de Lausanne, Faculté des HEC, DEEP. [Downloadable!]
  12. Sarah Parlane, 2003. "Auction Versus Private Treaty," Working Papers 200306, School Of Economics, University College Dublin. [Downloadable!]
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