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Does the seller of a house facing a large number of buyers always decrease its price when its first offer is rejected?


  • Jean J. Gabszewicz

    (CORE Université catholique de Louvain)

  • Tanguy van Ypersele

    () (GREQAM, Marseille)

  • Skerdilajda Zanaj

    () (CREA, University of Luxembourg)


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.

Suggested Citation

  • Jean J. Gabszewicz & Tanguy van Ypersele & Skerdilajda Zanaj, 2011. "Does the seller of a house facing a large number of buyers always decrease its price when its first offer is rejected?," CREA Discussion Paper Series 11-15, Center for Research in Economic Analysis, University of Luxembourg.
  • Handle: RePEc:luc:wpaper:11-15

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    References listed on IDEAS

    1. Fleurbaey,Marc & Maniquet,François, 2011. "A Theory of Fairness and Social Welfare," Cambridge Books, Cambridge University Press, number 9780521715348, October.
    2. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    3. Belleflamme,Paul & Peitz,Martin, 2010. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9780521681599, November.
    4. Drew Fudenberg & Jean Tirole, 1983. "Sequential Bargaining with Incomplete Information," Review of Economic Studies, Oxford University Press, vol. 50(2), pages 221-247.
    5. 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.
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    More about this item


    ambiguity; sequential bilateral trade; bayesian vs myopic behaviour.;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other


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