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Equilibrium Selling Mechanisms

Author

Listed:
  • Yongmin Chen

    (Economics Department, University of Colorado at Boulder)

  • Ruqu Wang

    (Economics Department, Queen's University and University of Colorado at Boulder)

Abstract

We consider the equilibrium choice of selling mechanisms by competing firms. For a model where a number of sellers choose sequentially between any two selling mechanisms, there is a unique (subgame perfect) equilibrium under fairly natural assumptions about the monotonicity and differences of the two mechanisms. All sellers choose the mechanism that has the higher per-seller surplus at a critical mass number of sellers. If a mechanism is efficient or is favored by the buyer in some "strong" sense, it will be selected as the equilibrium mechanism. Otherwise, the less efficient mechanism can emerge in equilibrium, even when the number of sellers is arbitrarily large. An increase in the number of sellers need not increase the buyer's surplus, and can sometimes lead to a less e¡Àcient equilibrium mechanism. When more than two selling mechanisms are available, however, the equilibrium may no long be unique; and there are usually multiple equilibria when sellers choose selling mechanisms simultaneously.

Suggested Citation

  • Yongmin Chen & Ruqu Wang, 2004. "Equilibrium Selling Mechanisms," Annals of Economics and Finance, Society for AEF, vol. 5(2), pages 335-355, November.
    • Handle: RePEc:cuf:journl:y:2004:v:5:i:2:p:335-355
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    References listed on IDEAS

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    1. Chen, Yongmin & Wang, Ruqu, 2004. "A model of competing selling mechanisms," Economics Letters, Elsevier, vol. 85(2), pages 151-155, November.
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    1. Cadsby, C. Bram & Servátka, Maroš & Song, Fei, 2013. "How competitive are female professionals? A tale of identity conflict," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 284-303.

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    More about this item

    Keywords

    Selling formats; Competing mechanisms;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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