Selling Goods of Unknown Quality: Forward Versus Spot Auctions
Isa Emin Hafalir
Carnegie Mellon University - David A. Tepper School of Business
affiliation not provided to SSRN
January 7, 2010
We consider an environment where the sale can take place so early that both the seller and the potential buyers have the same uncertainty about the quality of the good. We present a simple model that allows the seller to put the good for sale before or after this uncertainty is resolved, namely via forward auction or spot auction, respectively. We solve for the equilibrium of these two auctions and then compare the resulting revenues. We also consider the revenue implications of the insurance in forward auctions.
Number of Pages in PDF File: 13
Keywords: Forward Trading, Forward Auctions, Spot Auctions
JEL Classification: D44working papers series
Date posted: January 11, 2010
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