Selling Procedures with Private Information and Common Values
John H. Lindsey, II, William Samuelson, Richard Zeckhauser
Management Science · 1996 · Volume 42 · Issue 2
Abstract
The seller posted-price procedure is probably the most common method for making transactions in modern economies. We analyze the performance of posted pricing for transactions having significant common-value elements. In a model of two-sided private information, we characterize the fully revealing, perfect equilibrium offer strategy of the seller. We also characterize equilibrium behavior under two other pricing procedures—a sealed-bid procedure and a direct revelation mechanism. Finally, we examine the efficiency of these procedures and show that as the degree of common values increases, fewer mutually beneficial agreements are attained.
Keywords
bargaining, common values, game theory, asymmetric information
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