Competing trade mechanisms and monotone mechanism choice

Eberhard Feess, Christian Grund, Markus Walzl, Ansgar Wohlschlegel

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    Abstract

    We investigate the choice between posted prices and auctions of competing sellers with private valuations. Assuming that buyers face higher hassle costs in auctions, we show the existence of monotone pure strategy equilibria where sellers offer posted prices rather than auctions if and only if they have a sufficiently high reservation value. Posted prices sell with lower probability but yield a larger revenue in case of trade. Using an empirical strategy to compare revenues of posted prices and auctions that takes selling probabilities explicitly into account, we find our theoretical predictions supported by data from eBay auctions on ticket sales for the EURO 2008 European Football Championship.
    Original languageEnglish
    Article number0
    Pages (from-to)1108-1121
    Number of pages14
    JournalEuropean Journal of Operational Research
    Volume280
    Issue number3
    Early online date11 Aug 2019
    DOIs
    Publication statusPublished - 1 Feb 2020

    Keywords

    • Auctions/bidding
    • Competing sellers
    • Single-crossing
    • Posted prices

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