IDEAS home Printed from https://ideas.repec.org/p/luc/wpaper/11-15.html
   My bibliography  Save this paper

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

Author

Listed:
  • Jean J. Gabszewicz

    (CORE Université catholique de Louvain)

  • Tanguy van Ypersele

    () (GREQAM, Marseille)

  • Skerdilajda Zanaj

    () (CREA, University of Luxembourg)

Abstract

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
    as

    Download full text from publisher

    File URL: http://wwwen.uni.lu/content/download/44002/508033/file/2011-15%20-%20Does%20the%20seller%20of%20a%20house%20facing%20a%20large%20number%20of%20buyers%20always%20decrease%20its%20price%20when%20its%20first%20offer%20is%20rejected.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fleurbaey,Marc & Maniquet,François, 2011. "A Theory of Fairness and Social Welfare," Cambridge Books, Cambridge University Press, number 9780521715348.
    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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:luc:wpaper:11-15. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elisa Ferreira). General contact details of provider: http://edirc.repec.org/data/crcrplu.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.