Editor:
Universidad Carlos III de Madrid. Departamento de Economía
Issued date:
2014-05-08
ISSN:
2340-5031
Sponsor:
Ludo Visschers gratefully acknowledges financial support from the Juan de la Cierva Grant; project grant ECO2010-
20614 (Dirección general de investigación científica y técnica), and the Bank of Spain’s Programa de Investigación de
Excelencia.
Rights:
Atribución-NoComercial-SinDerivadas 3.0 España
Abstract:
In many markets, sellers advertise their good with an asking price. This is a price at
which the seller will take his good off the market and trade immediately, though it is
understood that a buyer can submit an offer below the asking price and that this offIn many markets, sellers advertise their good with an asking price. This is a price at
which the seller will take his good off the market and trade immediately, though it is
understood that a buyer can submit an offer below the asking price and that this offer may be
accepted if the seller receives no better offers. Despite their prevalence in a variety of real
world markets, asking prices have received little attention in the academic literature. We
construct an environment with a few simple, realistic ingredients and demonstrate that using
an asking price is optimal: it is the pricing mechanism that maximizes sellers’ revenues and it
implements the efficient outcome in equilibrium. We provide a complete characterization of
this equilibrium and use it to explore the positive implications of this pricing mechanism for
transaction prices and allocations.[+][-]