Benoit Julien, Ian King, John Kennes
Auctions Beat Posted Prices in a Small Market
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- 10.1628/0932456022975259
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In a model with two buyers and sellers we consider the choice of sales mechanism from three possibilities: posted prices, and auctions with and without reserve prices. With homogenous goods, sellers' expected revenues are highest when both sellers auction with reserve prices – 33% higher than if posting prices and 100% higher than if auctioning without reserve prices. When sellers can choose their mechanism before choosing prices, both sellers auction with a reserve price in the dominant strategy equilibrium. With heterogenous goods, the equilibrium with posted prices is inefficient (MONTGOMERY [1991]) but the equilibria with both types of auctions are efficient.