The Optimal Sequence of Prices and Auctions

38 Pages Posted: 27 Feb 2014 Last revised: 15 May 2019

See all articles by Hanzhe Zhang

Hanzhe Zhang

Department of Economics, Michigan State University

Multiple version iconThere are 2 versions of this paper

Date Written: May 14, 2019

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.

Keywords: buy-it-now, posted price, reserve price auction

JEL Classification: D44, D47

Suggested Citation

Zhang, Hanzhe, The Optimal Sequence of Prices and Auctions (May 14, 2019). Available at SSRN: https://ssrn.com/abstract=2401469 or http://dx.doi.org/10.2139/ssrn.2401469

Hanzhe Zhang (Contact Author)

Department of Economics, Michigan State University ( email )

486 West Circle Drive
East Lansing, MI 48824
United States

HOME PAGE: http://hanzhezhang.github.io/

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