Asking Price and Price Discounts: The Strategy of Selling an Asset Under Price Uncertainty
We consider fixed and asking price strategies in the context of selling an asset with Bernoullian updating of the sellerâ€™s subjective probability of sale at a given price. The determination of optimal fixed, asking and endogenous reservation prices is discussed under risk-neutrality and expected utility maximisation. With risk-neutrality, the optimal asking price exceeds the optimal fixed price when the expected gain is a strictly concave function. The sellerâ€™s choice between the fixed and the asking price strategies depends on several factors: the expected cost of haggling, price competition and the sellerâ€™s attitude towards risk. Copyright Springer Science+Business Media, LLC 2007
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