Pricing Mechanisms in Online Markets
A wide array of pricing mechanisms exists in online platforms, ranging from auctions and posted prices to haggling and hybrid formats. At the platform level as well as for individual sellers, the choice of pricing mechanism depends on the trade-off between transaction costs and efficient aggregation of information. This trade-off is resolved differently across specific online markets, and even within each market it can evolve over time. In some markets, different pricing mechanisms often coexist side by side, and this can be valuable for experimentation and price discrimination.
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