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The Optimal Sequence of Prices and Auctions

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  • Zhang, Hanzhe

    (Michigan State University, Department of Economics)

Abstract

A seller chooses to either post a price or run a reserve-price auction each period to sell a good before a deadline. Buyers with independent private values arrive over time. Assume that an auction costs more to the seller than a posted price. For a wide range of auction costs, the profit-maximizing mechanism sequence is to post prices first and then to run auctions. The optimality of the prices-then-auctions mechanism sequence provides a new justification for the use of the buy-it-now selling format on eBay.

Suggested Citation

  • Zhang, Hanzhe, 2019. "The Optimal Sequence of Prices and Auctions," Working Papers 2019-3, Michigan State University, Department of Economics.
  • Handle: RePEc:ris:msuecw:2019_003
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    References listed on IDEAS

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    Cited by:

    1. Alison Watts, 2016. "Auctions Versus Private Negotiations in Buyer-Seller Networks," Games, MDPI, vol. 7(3), pages 1-14, August.
    2. Hanzhe Zhang, 2021. "Prices versus auctions in large markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(4), pages 1297-1337, November.

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    More about this item

    Keywords

    buy-it-now; posted price; reserve price auction;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design

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