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The analytics of search with posted prices

Author

Listed:
  • Michael A. Arnold

    () (Department of Economics, University of Delaware, Newark, DE 19716-2720, USA)

  • Steven A. Lippman

    () (Anderson Graduate School of Management at UCLA, Los Angeles, CA 90095-1481, USA)

Abstract

This paper investigates the characteristics of the optimal posted price in the standard sequential search paradigm. Much of the intuition gleaned from the extensive sequential search literature in which the seller adopts a reservation price does not carry over to the posted price setting. For example, an increase in buyer valuations can lead to a reduction in the optimal posted price. We do, however, provide sufficient conditions on the hazard rate function h which ensure that an increase in demand induces an increase in the optimal posted price. As exhibited herein, the analysis of the posted price model depends critically upon analytical properties of h. Amongst the issues treated are the elasticity of demand, finite horizon, sale of multiple units, and competitive equilibrium.

Suggested Citation

  • Michael A. Arnold & Steven A. Lippman, 2001. "The analytics of search with posted prices," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 17(2), pages 447-466.
  • Handle: RePEc:spr:joecth:v:17:y:2001:i:2:p:447-466
    Note: Received: October 21, 1999; revised version: March 7, 2000
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    Citations

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    Cited by:

    1. Steven Lippman & Sheldon Ross, 2008. "Variability is beneficial in marked stopping problems," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 35(2), pages 333-342, May.
    2. Gershkov, Alex & Moldovanu, Benny, 2007. "The Dynamic Assignment of Heterogenous Objects: A Mechanism Design Approach," CEPR Discussion Papers 6439, C.E.P.R. Discussion Papers.
    3. Xuanming Su, 2007. "Intertemporal Pricing with Strategic Customer Behavior," Management Science, INFORMS, vol. 53(5), pages 726-741, May.

    More about this item

    Keywords

    Sequential search; Posted price; Hazard rate.;

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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