Asking Price And Price Discounts: The Strategy Of Selling An Asset Under Price Uncertainty
(Originally published in Theory and Decision (2007) 62:281-301 (c) Springer) - We consider fixed and asking price strategies in the con- text 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-neutral- ity 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.
References listed on IDEAS
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- Zuehlke, Thomas W, 1987. "Duration Dependence in the Housing Market," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 701-704, November. Full references (including those not matched with items on IDEAS)
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