The Dominance of Retail Stores

32 Pages Posted: 23 Jun 2003

See all articles by Alexandre Ziegler

Alexandre Ziegler

University of Zurich - Department of Banking and Finance

Edward P. Lazear

Stanford Graduate School of Business; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: June 2003

Abstract

Most items are sold to consumers by retail stores. Stores have two features that distinguish them from auctions. First, the price is posted and a consumer who values the good at more than the posted price is sold the good. Second, the sale takes place as soon as the consumer decides to buy. In contrast, auctions have prices that are determined ex post and the potential consumer must wait until the auction is held to buy the good. Consequently, auctions result in false trading', where buyers sometimes pass up other valuable opportunities while waiting for the auction to occur or instead make undesired duplicate purchases. Retail stores dominate auctions when the good is perishable and/or becomes obsolete quickly, when the market is thin, and when close substitutes for the good are plentiful. These predictions are consistent with a number of observed phenomena.

Suggested Citation

Ziegler, Alexandre and Lazear, Edward P., The Dominance of Retail Stores (June 2003). NBER Working Paper No. w9795, Available at SSRN: https://ssrn.com/abstract=418297

Alexandre Ziegler

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Z├╝rich, 8032
Switzerland

Edward P. Lazear (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-9136 (Phone)
650-723-0498 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

IZA Institute of Labor Economics

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Germany

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