Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/69474
Authors: 
Lester, Benjamin
Visschers, Ludo
Wolthoff, Ronald
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper Series, Forschungsinstitut zur Zukunft der Arbeit 7163
Abstract: 
In many markets, sellers advertise their good with an asking price. This is a price at which the seller is willing to 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.
Subjects: 
asking prices
competing mechanism design
auctions with entry
competitive search
JEL: 
C78
D21
D44
D47
D82
D83
L11
R31
Document Type: 
Working Paper

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