Common-value auction versus posted-price selling: an agent-based model approach
Previous theoretical work has compared a private-value auction and posted-price market, and an affiliated-value auction and a posted-price market to determine the selling method preferred by sellers. Much less, however, is known about the sellers preferred selling method when the buyers have a common value of the item. Our objective is to determine if a first-price auction or a posted-price market provides a seller with the larger expected revenue when buyers have a common value of the item being sold. An agent-based posted-price market and an agent-based first-price common-value auction with a reserve price are developed to compare these selling methods. Holding the buyers uncertainty about the value of the item constant, the seller prefers the posted-price market when the seller has no uncertainty about the items value. When the seller has an equal level of uncertainty as the buyers, the sellers expected revenue for each market is similar. As the sellers uncertainty increases beyond the level of the buyers uncertainty, the auction with a reserve price eventually becomes the preferred choice.
common-value auction agent-based modeling posted-price market particle swarm optimization d44 d89 l13