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Auctions and Posted Prices in Directed Search Equilibrium


  • Julien Benoit

    () (University of Miami)

  • Kennes John

    () (University of Copenhagen)

  • King Ian Paul

    () (University of Auckland)


We compare equilibrium allocations in directed search models where prices are determined alternatively by posting and by competing auctions, with the following results. With finite numbers of players, sellers' expected payoffs are higher when all sellers auction than when all sellers post. This difference is largest in the 2-by-2 case, where payoffs to sellers are 1/3 higher if they auction. The difference in the payoffs decreases rapidly with market size and vanishes in the limit "large" economy. When sellers can choose whether to post prices or auction in the 2-by-2- case, all combinations (auction-auction, post-post, and auction-post) can occur in equilibrium if sellers choose mechanism and price simultaneously. However, if sellers choose mechanism before price then the dominant strategy equilibrium has both sellers auctioning.

Suggested Citation

  • Julien Benoit & Kennes John & King Ian Paul, 2001. "Auctions and Posted Prices in Directed Search Equilibrium," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(1), pages 1-16, July.
  • Handle: RePEc:bpj:bejmac:v:topics.1:y:2001:i:1:n:1

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    References listed on IDEAS

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    Cited by:

    1. Klaus Kultti, 2003. "Comparison of Auctions and Posted Prices in a Finite Random Matching Model," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 159(3), pages 457-457, September.
    2. John Kennes, 2004. "Competitive Auctions: Theory and Application," Discussion Papers 04-16, University of Copenhagen. Department of Economics.
    3. Gomis-Porqueras, Pedro & Julien, Benoit & Chengsi, Wang, 2012. "Informative Advertising in Directed Search," MPRA Paper 38057, University Library of Munich, Germany.
    4. King, Ian & Kennes, John & Julien, Benoit, 2001. "Residual Wage Disparity in Directed Search Equilibrium," Working Papers 209, Department of Economics, The University of Auckland.
    5. Julien, Benoit & Kennes, John & King, Ian Paul, 2011. "Implementing the Mortensen rule in a frictional labor market," Journal of Macroeconomics, Elsevier, vol. 33(1), pages 80-91, March.

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