Does the seller of a house facing a large number of buyers always decrease its price when its first offer is rejected?
This paper investigates the optimal price sequence of a two period tentative to sell an indivisible good, with take-it-or-leave-it offers, in which the seller faces ambiguity about the buyers' willingness to pay. If the first round fails, the seller updates its beliefs on the state of the market in accordance with Bayes rule and quotes a second and final price. We show that the optimal sequence of prices can be increasing. Furthermore, we describe the optimal sequence of prices with a myopic seller who does not update his beliefs in the second period. In this case, the optimal price sequence is always decreasing.
|Date of creation:||2011|
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- Fleurbaey,Marc & Maniquet,FranÃ§ois, 2011.
"A Theory of Fairness and Social Welfare,"
Cambridge University Press, number 9780521715348, November.
- Fleurbaey,Marc & Maniquet,FranÃ§ois, 2011. "A Theory of Fairness and Social Welfare," Cambridge Books, Cambridge University Press, number 9780521887427, November.
- Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
- Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 661465000000000387, David K. Levine.
- Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
- Belleflamme,Paul & Peitz,Martin, 2010. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9780521681599, November.
- Drew Fudenberg & Jean Tirole, 1983. "Sequential Bargaining with Incomplete Information," Review of Economic Studies, Oxford University Press, vol. 50(2), pages 221-247.
- Duranton, Gilles & Martin, Philippe & Mayer, Thierry & Mayneris, Florian, 2010. "The Economics of Clusters: Lessons from the French Experience," OUP Catalogue, Oxford University Press, number 9780199592203, April. Full references (including those not matched with items on IDEAS)
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