Auctions with an asking price

Peyman Khezr | University of Queensland

This paper studies a sales mechanism, prevalent in housing markets, where the seller does not reveal or commit to a reserve price but instead publicly announces an asking price.

We show that the seller sets an asking price such that, in equilibrium, buyers of certain types would accept it with positive probability.

We also show that this sales mechanism, with an optimally chosen asking price set above the seller's reservation value, does better than any standard auction with a reserve price equal to the seller's reservation value.