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Meeting Technologies and Optimal Trading Mechanisms in Competitive Search Marks

Author

Listed:
  • Ronald Wolthoff

    (University of Toronto)

  • Ludo Visschers

    (Universidad Carlos III, Madrid and University of Edinburgh)

  • Benjamin Lester

    (Federal Reserve Bank of Philadelphia)

Abstract

In many markets, sellers advertise their good with an asking price. This is a price at which the seller will take his good off the market and trade immediately, though it is understood that a buyer can submit an offer below the asking price and that this offer may be accepted if the seller receives no better offers. Despite their prevalence in a variety of real world markets, asking prices have received little attention in the academic literature. We construct an environment with a few simple, realistic ingredients and demonstrate that using an asking price is optimal: it is the pricing mechanism that maximizes sellers' revenues and it implements the efficient outcome in equilibrium. We provide a complete characterization of this equilibrium and use it to explore the positive implications of this pricing mechanism for transaction prices and allocations.

Suggested Citation

  • Ronald Wolthoff & Ludo Visschers & Benjamin Lester, 2014. "Meeting Technologies and Optimal Trading Mechanisms in Competitive Search Marks," 2014 Meeting Papers 188, Society for Economic Dynamics.
  • Handle: RePEc:red:sed014:188
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    References listed on IDEAS

    as
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    9. Lester, Benjamin & Visschers, Ludo & Wolthoff, Ronald, 2017. "Competing with asking prices," Theoretical Economics, Econometric Society, vol. 12(2), May.
    10. James Albrecht & Pieter Gautier & Susan Vroman, 2016. "Directed Search in the Housing Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 218-231, January.
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    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Jehiel, Philippe & Lamy, Laurent, 2015. "A mechanism design approach to the Tiebout hypothesis," CEPR Discussion Papers 10758, C.E.P.R. Discussion Papers.
    2. James Albrecht & Pieter Gautier & Susan Vroman, 2016. "Directed Search in the Housing Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 218-231, January.
    3. Piero Gottardi & Sarah Auster, 2016. "Competing Mechanisms in Markets for Lemons," 2016 Meeting Papers 264, Society for Economic Dynamics.
    4. Gomis-Porqueras Pedro & Julien Benoît & Wang Liang, 2018. "Competitive Search with Ex-post Opportunism," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 18(1), pages 1-17, January.
    5. Lester, Benjamin & Visschers, Ludo & Wolthoff, Ronald, 2015. "Dynamic Relational Contracts under Complete Information," SIRE Discussion Papers 2015-51, Scottish Institute for Research in Economics (SIRE).
    6. repec:eee:jetheo:v:169:y:2017:i:c:p:453-473 is not listed on IDEAS
    7. Cai, Xiaoming & Gautier, Pieter A. & Wolthoff, Ronald P., 2017. "Search frictions, competing mechanisms and optimal market segmentation," Journal of Economic Theory, Elsevier, vol. 169(C), pages 453-473.
    8. Gautier, Pieter A. & Moraga-González, José L. & Wolthoff, Ronald P., 2016. "Search costs and efficiency: Do unemployed workers search enough?," European Economic Review, Elsevier, vol. 84(C), pages 123-139.
    9. Lester, Benjamin & Visschers, Ludo & Wolthoff, Ronald, 2017. "Competing with asking prices," Theoretical Economics, Econometric Society, vol. 12(2), May.
    10. Cai, Xiaoming, 2015. "Minimum prices in a model with search frictions and price posting," Economics Letters, Elsevier, vol. 135(C), pages 61-64.
    11. repec:aea:jeclit:v:55:y:2017:i:2:p:493-544 is not listed on IDEAS
    12. repec:eee:jetheo:v:172:y:2017:i:c:p:376-409 is not listed on IDEAS
    13. Mangin, Sephorah, 2017. "A theory of production, matching, and distribution," Journal of Economic Theory, Elsevier, vol. 172(C), pages 376-409.
    14. Benoît Julien & Sephorah Mangin, 2016. "Efficiency in Search and Matching Models: A Generalized Hosios Condition," Monash Economics Working Papers 28-16, Monash University, Department of Economics.
    15. Ronald Wolthoff, 2014. "Applications and Interviews: Firms' Recruiting Decisions in a Frictional Labor Market," Working Papers tecipa-522, University of Toronto, Department of Economics.
    16. Lester, Benjamin & Visschers, Ludo & Wolthoff, Ronald, 2017. "Competing with asking prices," Theoretical Economics, Econometric Society, vol. 12(2), May.
    17. Ronald Wolthoff & Pieter Gautier & Xiaoming Cai, 2016. "Inclusive versus Exclusive Markets:," 2016 Meeting Papers 262, Society for Economic Dynamics.
    18. Lester, Benjamin & Visschers, Ludo & Wolthoff, Ronald, 2015. "Dynamic Relational Contracts under Complete Information," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-51, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    19. Peter Norman, 2017. "Matching with Frictions and Entry with Poisson Distributed Buyers and Sellers," 2017 Meeting Papers 1150, Society for Economic Dynamics.
    20. Xiaoming Cai & Pieter Gautier & Ronald Wolthoff, 2015. "Inclusive versus Exclusive Markets: Search Frictions and Competing Mechanisms," Working Papers tecipa-545, University of Toronto, Department of Economics.

    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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