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Selecting a Selling Institution: Auctions versus Sequential Search

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  • Arnold, Michael A
  • Lippman, Steven A

Abstract

The authors consider the seller's choice between sequential search and an auction when selling n homogeneous units of a good in the presence of informational asymmetries, discounting, and transaction costs. Their analysis shows that the expected return per unit from sequential selling decreases in n, the number of units being sold. For the auction with suitable restrictions, the expected return per unit increases in n. Thus, sequential search is the preferred institution if n is small, whereas the auction is preferred if n is large. Historical details of the evolution of livestock markets closely fit the authors' theoretical results. Copyright 1995 by Oxford University Press.

Suggested Citation

  • Arnold, Michael A & Lippman, Steven A, 1995. "Selecting a Selling Institution: Auctions versus Sequential Search," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 1-23, January.
    • Handle: RePEc:oup:ecinqu:v:33:y:1995:i:1:p:1-23
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    Cited by:

    1. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-1575, September.
    2. Peyman Khezr & Abhijit Sengupta, 2014. "Asking Price Mechanism with Dynamic Arrivals," Discussion Papers Series 524, School of Economics, University of Queensland, Australia.
    3. Habib, Michel A. & Ziegler, Alexandre, 2007. "Why government bonds are sold by auction and corporate bonds by posted-price selling," Journal of Financial Intermediation, Elsevier, vol. 16(3), pages 343-367, July.
    4. Sun, Daewon, 2008. "Dual mechanism for an online retailer," European Journal of Operational Research, Elsevier, vol. 187(3), pages 903-921, June.
    5. Li Zhiwen & Arnold Michael & Penard Thierry, 2018. "How Increasing Supplier Search Cost Can Increase Welfare," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 18(1), pages 1-7, January.

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