Journal Article

Name Your Own Price at Priceline.com: Strategic Bidding and Lockout Periods

Chia-Hui Chen

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 79, issue 4, pages 1341-1369
Published in print October 2012 | ISSN: 0034-6527
Published online January 2012 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1093/restud/rds005
Name Your Own Price at Priceline.com: Strategic Bidding and Lockout Periods

More Like This

Show all results sharing these subjects:

  • Information, Knowledge, and Uncertainy
  • Microeconomics
  • Market Structure and Pricing

GO

Show Summary Details

Preview

A buyer suggests prices to N sellers in a time period and buys from the seller who accepts the bid first. The number of bidding rounds is determined by how frequently the buyer can make an offer. We show that with no limit on the frequency and without discounting, the price path is either kept flat initially with large jumps at the end or increasing steadily over time. Which class of path occurs in equilibrium depends on the buyer's trade-off between committing to a price ceiling versus finely screening the sellers' costs. With discounting, limiting the number of rounds mitigates the delay caused by the reluctance to raise bids in the first class of equilibrium and therefore can benefit the buyer. This result suggests why, in reality, bargaining parties often take measures to make their offers rigid and consequently force themselves to make fewer offers.

Keywords: Auction; Bargaining; Deadline effect; Limited commitment; D02; D44; D82

Journal Article.  14875 words.  Illustrated.

Subjects: Information, Knowledge, and Uncertainy ; Microeconomics ; Market Structure and Pricing

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.