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Selling Procedures with Private Information and Common Values

Author

Listed:
  • John H. Lindsey, II

    (Harvard University, Cambridge, Massachusetts 02138)

  • William Samuelson

    (School of Management, Boston University, 704 Commonwealth Avenue, Boston, Massachusetts 02215)

  • Richard Zeckhauser

    (Harvard University, Cambridge, Massachusetts 02138)

Abstract

The seller posted-price procedure is probably the most common method for making transactions in modern economies. We analyze the performance of posted pricing for transactions having significant common-value elements. In a model of two-sided private information, we characterize the fully revealing, perfect equilibrium offer strategy of the seller. We also characterize equilibrium behavior under two other pricing procedures---a sealed-bid procedure and a direct revelation mechanism. Finally, we examine the efficiency of these procedures and show that as the degree of common values increases, fewer mutually beneficial agreements are attained.

Suggested Citation

  • John H. Lindsey, II & William Samuelson & Richard Zeckhauser, 1996. "Selling Procedures with Private Information and Common Values," Management Science, INFORMS, vol. 42(2), pages 220-231, February.
  • Handle: RePEc:inm:ormnsc:v:42:y:1996:i:2:p:220-231
    DOI: 10.1287/mnsc.42.2.220
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    Cited by:

    1. Gjerdrum, Jonatan & Shah, Nilay & Papageorgiou, Lazaros G., 2002. "Fair transfer price and inventory holding policies in two-enterprise supply chains," European Journal of Operational Research, Elsevier, vol. 143(3), pages 582-599, December.
    2. Olivier Compte & Andrew Postlewaite, 2010. "Simple Auctions, Second Version," PIER Working Paper Archive 13-017, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Apr 2013.

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