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Auctions with an asking price

  • Peyman Khezr
  • Flavio Menezes
Original Paper
  • 120 Downloads

Abstract

This paper studies a sales mechanism, prevalent in housing markets, where the seller does not reveal or commit to a reserve price but instead publicly announces an asking price. We show that the seller sets an asking price such that, in equilibrium, buyers of certain types would accept it with positive probability. We also show that this sales mechanism, with an optimally chosen asking price set prior to the seller learning her value, does better than any standard auction with a reserve price equal to the seller’s reservation value. We then extend the analysis to the case where the asking price reveals information about the seller’s reservation value. We show that in this case there is a separating equilibrium with fully-revealing asking prices, which is revenue-equivalent to a standard auction with a reserve price set at the seller’s reservation value.

Keywords

Asking price Auctions 

JEL Classification:

D44 R30 

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.School of EconomicsUniversity of QueenslandBrisbaneAustralia

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