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The Optimal Sequence of Prices and Auctions

32 Pages Posted: 27 Feb 2014 Last revised: 26 Aug 2017

Hanzhe Zhang

Michigan State University

Date Written: August 25, 2017


A seller chooses to post a price or to 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 justifies 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 (August 25, 2017). Available at SSRN: or

Hanzhe Zhang (Contact Author)

Michigan State University ( email )

East Lansing, MI 48824
United States

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