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Common-value auction versus posted-price selling: an agent-based model approach

Author

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  • Christopher Boyer

    ()

  • B. Brorsen
  • Tong Zhang

    ()

Abstract

Previous theoretical work has compared a private-value auction and posted-price market, and an affiliated-value auction and a posted-price market to determine the selling method preferred by sellers. Much less, however, is known about the seller’s preferred selling method when the buyers have a common value of the item. Our objective is to determine if a first-price auction or a posted-price market provides a seller with the larger expected revenue when buyers have a common value of the item being sold. An agent-based posted-price market and an agent-based first-price common-value auction with a reserve price are developed to compare these selling methods. Holding the buyers’ uncertainty about the value of the item constant, the seller prefers the posted-price market when the seller has no uncertainty about the item’s value. When the seller has an equal level of uncertainty as the buyers, the seller’s expected revenue for each market is similar. As the seller’s uncertainty increases beyond the level of the buyers’ uncertainty, the auction with a reserve price eventually becomes the preferred choice. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Christopher Boyer & B. Brorsen & Tong Zhang, 2014. "Common-value auction versus posted-price selling: an agent-based model approach," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 9(1), pages 129-149, April.
  • Handle: RePEc:spr:jeicoo:v:9:y:2014:i:1:p:129-149 DOI: 10.1007/s11403-013-0115-z
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Agent-based modeling; Common-value auction; Particle swarm optimization; Posted-price market; D44; D89; L13;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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