ISSN:
1573-045X
Keywords:
Real estate auctions
;
Search markets
;
Optimal auctions
;
Negotiated markets
;
Posted offer markets
;
Resolution trust corporation
Source:
Springer Online Journal Archives 1860-2000
Topics:
Economics
Notes:
Abstract The issue of choosing to sell property by auction or by traditional negotiated search markets is addressed in this article. A general selling institution called the slow Dutch auction is introduced. This general selling mechanism reduces to either a conventional auction, a posted offer, or some time dependent mix of these selling institutions depending on the pricing rule chosen by the seller. We model search by having potential buyers whose private valuation for the property is unknown to the seller arrive randomly over time. With this general framework the seller's problem is to choose a selling mechanism that maximizes expected wealth. Surprisingly, we find that the optimal selling institution is always a posted offer market. The seller chooses an optimal posted price and waits until a buyer arrives who is willing to pay this price. Auctions are never optimal.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1007/BF02341912
Permalink
